By William Davis

Remember when only sold books? No? Well, then, here’s a quick refresher: Way back in 1994, a computer scientist named Jeff Bezos launched what is now the world’s fourth most valuable company as an online bookstore. Out of his garage, as legend goes. Originally called Cadabra, the little Seattle-based venture sold more than a few books, and quickly diversified into audiobook downloads, software, video games, electronics, apparel, toys, turnips, and anything else the company could peddle at a profit. Meanwhile, Jeff allocates a good chunk of his net worth to a 1987 Honda left to park in the driveway.

To keep overhead low in the beginning, office desks were made from cheap doors, with sawed-off two-by-fours for legs. The company still reportedly hands out a Door Desk Award to employees who implement thrifty ideas.

We’re thinking a lot about the world’s largest Internet retailer these days since AMZN stock is accounting for about a quarter of the S&P 500’s gains in 2018. Correspondingly, the consumer-discretionary sector of which Amazon and Netflix are now a part has produced more than a third of the big benchmark’s advance. While such narrow leadership is a worrying sign for many investors, Jeff’s net worth overtakes Bill Gates’ to make him the richest man in the world.

Despite big sales and a healthy customer base, it wasn’t until January 2002 that the company reported its first profitable quarter, making a relatively modest $5 million

The most valuable retailer in the U.S. is, of course, one of the five companies regrettably known as the FAANG stocks, which besides Amazon and Netflix include Facebook, Apple, and Google. While the group was responsible for a large part of last year’s rally, only AMZN is extending its 2018 gains in similar fashion. NFLX is holding its own, but FB, APPL, and GOOG haven’t kept pace at all following a batch of mixed earnings reports and increased pressure from regulators. Bezos’ net worth, meanwhile, passes the GDP of Kazakhstan.

Amazon’s current logo was designed to depict a smile that goes from A to Z.

It’s hard not to fret a bit about the dominance of a single sector or stock in the market, even if it is the world’s largest provider of cloud infrastructure services. But the fact is, fears of the sort have generally proved unfounded, at least in recent years. Remember how the markets continued marching higher in 2016 after shares of Apple, which had been a driver of the rally, hit the wall? It’s been said about Amazon that “when you have something that can really grow and innovate, there’s really no limit to the upside.” Jeff Bezos, meanwhile, has plans for commercial human spaceflight later this year.

What the pundits have been saying…

“Professional money management manages volatility and manages drawdowns. Because if you don’t stay invested, you can’t keep compounding.”

  • Jared Dillian, investment strategist at Mauldin Economics

What people have been saying…

“GE is a relic of a bygone era.”

  • Robert Salomon, management professor at New York University’s Stern School of Business

What the numbers have been saying…

  • $91.1 million

Twitter’s first quarterly profit since it went public in November 2013. The swing into the black was largely fueled by a 28% drop in expenses, driven by lower stock-based compensation.

What the equity markets have been doing…

INDEX Friday’s Close Two-Week Point Change Year-to-Date Change
DJIA 25,309.99 +1119.09 +2.39%
S&P 500 2,747.30 +127.7 +2.76%
NASDAQ     7,337.39 +462.90 +6.29%
Russell 2000   1,547.30 +59.18 +0.77%


What the fixed income markets have been doing…


FIXED INCOME Period Change YTD 12 Months Yield
U.S. Treasuries
-(2.2)% -(0.5)% 2.9%
U.S. Investment Grade +0.1% -(2.6)% +2.5% 3.7%
U.S. High Yield -(0.1)% -(0.5)% +4.1% 6.2%
U.S. Municipals NC -(1.5)% +2.9% 2.6%
Non-U.S. Developed NC +2.7% +11.7% 0.9%


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