(AMZN) Archives

We have just endured three weary months of tedious range trading, typical of a normal summer?s action. The problem is that the actual summer is about to begin. Are we going to suffer another three months of tedious range trading? Is summer trading this year going to last a full six months?

Is this the endless summer of 2014?

That is the alarming conclusion of the many hardened and seasoned traders I know. I have been saying all year that 2014 might be a fourth quarter year. It?s looking like my worst nightmare is coming true. Can you blame my friends for throwing in the towel?

The fact that almost all traditional trading tools have recently been utterly worthless hasn?t helped.

Take technical analysis. In a flat market, commentators urge you to buy every false upside breakout, and then sell every false breakdown, only to see it snap back in the opposite direction the next day. You don?t have to suffer too many round trips following this strategy before you run out of money.

Economic data isn?t useful either. It has been unrelentingly positive, as have corporate earnings, with a few notable exceptions (Amazon (AMZN), Fire Eye (FEYE)). Yet, the market can?t carry out a sustained rally, frustrating bulls to no end. It seems that one day, the market is discounting an heroic? 3% GDP growth rate this year, the next day only a disappointing 2%.

Talk about a bipolar market.

The (SPX) better get a move on. The dismal Q1 report showed that the economy actually shrunk by -0.2%-0.8%. That only allows for three more quarters to stage a comeback, requiring absolutely torrid growth rates. Maybe this is why stocks can?t go down either.

Everyone knows the market will be up on the year, and they don?t want to sell positions for fear they won?t be able to get back in when the long awaited breakout finally happens. That would bring a second year of relative underperformance in a row for most portfolio managers, not exactly a career boosting move.

So while the market is tearing the petals off my own 2014 performance with a ?love me, love me not? torture routine, I think I?ll stay on the sidelines. That?s why I bailed on my last remaining position, a small long in the iPath S&P 500 VIX Short Term Futures ETN (VXX), taking yet another shaving cut on my numbers.

The only way to survive in this industry for the long term is to stay out when you don?t understand what is happening. There are times when there is just no money to be made in the market. This is one of those times.

Screaming at it, throwing your handset through your monitor, or tossing your PC out the window, all things I have seen frustrated traders do, isn?t going to improve the situation.

Go watch a season of Game of Thrones instead.

Better Than Watching the Market

AT&T (T), or Telephone as we used to call it on the floor on the New York Stock Exchange when we hand traded its shares, enjoyed a nice little 50-cent pop yesterday, to $34, only the second day it managed to rise this year.

The move comes after a federal appeals court in Washington DC ruled that the FCC exceeded its authority when it told Verizon Communication (VZ) that it could not charge different prices to different content providers based on their bandwidth and numbers of users.

This is a reversal of the FCC's "net neutrality" rule and should allow both Verizon and AT&T to increase revenues and help protect their profits from customers who are costing them more money to service. ?Big users of broadband, like Netflix (NFLX) and Amazon (AMZN), saw their shares suffer accordingly.

You would think it would be off to the races for (T). But it won?t, as not all is well with Ma Bell. One of my first jobs at Morgan Stanley some 32 years ago was to break this company up into the seven ?baby bells? at the direction of the Antitrust Division of the Justice Department (I carried the shareholder ballots from one floor of our building to another). The company traded off its local telephone exchanges for the right to go into the computer business. I have been following it ever since.

For a start, (T) is suffering from some major internal cash flow problems. Revenues have been stagnant for years. Its hard-wired infrastructure has been corroding away for years. The capital spending needed to fix this will be a drag on any future earnings, and is unlikely to generate any real payoff. Do you know anyone under the age of 30 who owns a landline? It?s a wireless world, baby. Did I mention that their service sucks beyond belief?

Every pension fund manager in the country already owns this stock for its generous 5.30% dividend yield. One has to ask how long the company can maintain this in the face of a stagnant business in a highly competitive industry. Now that we are in a world of rising long-term interest rates, this yield will provide much less support than it has in the past.

The hedge fund community has been aware of these difficulties for a while, and has been pounding every rally. This is why (T) completely missed out on last year?s ferocious, record setting bull market, posting a zero return for 2013, versus a 26% increase in the main indexes.

AT&T is the oldest stock to inhabit the Dow 30, being a successor to a company founded by Alexander Graham Bell, the inventor of the telephone. It has long been a pillar of the investment establishment (it took a brief vacation from the index after the breakup). Its history mirrors that of American capitalism.

With 100 million customers and a market capitalization of $179 billion, it certainly occupies a big footprint. Time to put this beast out of its misery and retire it to the dustbin of history.

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