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Dan: The Amazon Industrial Index

By - - Equities on December 16, 2016 1:29 PM Follow-Ups bezos_laughing-0

For the better part of 2016 the Dow Jones Transport Index, measured by the IYT (the iShares Transport etf) traded in a tight consolidation in the low to mid $140s:

IYT 1yr chart from Bloomberg

The breakout since the election is fairly epic, and for you measured move people, the rally of nearly $25 is nearly equal to the $25 rally from the January 2016 lows to the consolidation level in the mid $140s.

Just looking at the recent breakout doesn’t really tell the whole story of why this move is important to some market participants. There are those traditionalists who believe the strength of the Dow Jones Industrial Average, which has for the last few years been routinely making new highs, cannot continue to do so without the participation of the transports.

DIA 5yr from Bloomberg

The DJIA has shown pretty good action vs the Transports which at their lows in Jan were down 30% from its all time high made in late 2014. Now just this week it’s made a new all time high, one that for the moment feels a bit precarious.

IYT 5yr from Bloomberg

Why the relative under-performance by Transports? And is the relationship breaking down? Well, first and foremost, few components driving the performance of the DJ Industrial Average in 2016 are actually Industrial. The only two real industrial stocks in the top 10 of the Dow weightings are 3M & Boeing, with the rest financial/tech/retail/energy. Which means the Transports and the Industrial average are much more different than they were in the past as technology (e.g. the software, the cloud, webb apps) separates itself from traditional manufacturing, infrastructure and shipping.

Which brings me to a headline this morning from Business Insider about Amazon:

It seems like tech names like Amazon are setting their sights on every industry sector, and pretty soon it’s going to be hard to tell sub-sectors of major indices apart.

I would not hold you breath for AMZN to become a component of the IYT, but they are coming for some of its largest components, with Drone Delivery, this week completing its first commercial delivery via Drone, logistics and now trucking and of course their leasing of 20 Boeing 767 freighter jets to embark on their own dedicated air cargo network.

Amazon is quickly becoming a major index in and of itself, with components in retail, tech, the cloud, logistics, media, hardware, payments and who knows what next.

0 Follow-Ups

Dan: $NFLX – It’s Different this Time :)

By - - Equities on June 10, 2015 1:51 PM 2 Follow-Ups DanInitial Last night on CNBC's Fast Money we discussed the merits of Netflix's bounce in anticipation of a stock split. I think regular viewers of the show know where I stand on this sort of stuff, it's almost entirely nonsense but often becomes a self fulfilling prophecy. The assumption is when a cult stock ... Read More →

Mike: Content providers adapt too – $NFLX

By - - Equities on June 10, 2015 8:04 PM 1 Follow-Ups MikeInitial Let's break this down into two parts shall we? Content and distribution. On the distribution side their offering was essentially unique, but that is no longer true. Content is now on demand pure and simple, they have subs, they have growth, they have scale. Everyone i know subscribes, but subscri... Read More →

BK: Take profits in $NFLX without hesitation.

By - - Equities on June 11, 2015 8:40 AM 0 Follow-Ups BKInitial I couldn't agree more with Dan about the NFLX move to all time highs on a stock split - this is the most absurd reason to invest in a stock. But hey, dumber strategies have worked. My view on Netflix was that once HBO went over the top the NFLX business model was broken. I thought competition wou... Read More →
This is Part of a 3 part Debate on Equities