2013 was one for the record books - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 31 December 2013
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2013 was one for the record books A  A  A

Baltimore, Maryland

New Year's Eve, 2013

A helluva year!

Christmas Day was spent dodging drone attacks.

No kidding. Edward, our youngest son, got a drone for a present. Within minutes he was flying around the room, buzzing everyone.

It was like being 'back in 'nam.' When we heard the rotor blades, we ducked.

How ingenious, we thought. A marvel of miniaturization. A technological triumph. Another pain in the derriere.

But drones are the wave of the future. Everyone says so. Soon, you'll be able to use them to spy on your neighbors, just like the NSA. Maybe they can be taught to open the refrigerator door, and deliver a cold beer while you're watching the Super Bowl. Or maybe they will deliver packages from Amazon, more about that in a minute.

Christmas is over. And tonight we'll raise a glass to 2013. So many crazy things are going on. Deliver Christmas packages by drone? Sure, why not.

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Yes, 2013 was one for the record books. So much happened. And nothing happened. It was a great year...and a miserable one, too.

It was a year of contradictions and paradoxes.

Things that should have happened in January neglected to show up at all. Things that should never have happened, seemed to happen every day.

There was supposed to be a recovery. But key indicators -- inflation and wages -- denied it. The CPI actually went down. The feds managed to force down the unemployment toll, but only by stashing the dead bodies among the statistics of "discouraged" and otherwise unemployable souls.

Meanwhile, the Fed continued it spree of QE and ZIRP (zero interest rate policy). And gold fell like a stone. 'Funny money' was created at a pace never before seen in history. But investors didn't giggle or guffaw. Instead, they did the opposite of what they 'should' have done; they took the paper and sold the metal.

The Fed did eventually begin the 'tapering off' it promised, but then made it clear that it had no intention of actually following through.

Stocks were over-priced when the year began...and even more over-priced when it ended. On news of the 'taper,' prices should have begun to fall, but investors took the news for what it was worth. That is, they didn't believe it. Besides, every time they looked over, the Fed was dumping in more liquor into the punch bowl.

And so, on the last day of the year, the New Year's Eve party should be irrational and exubberant, just like the preceding 12 months. Stocks are pumped up. Earnings have been inflated by zero rates. And prices have been pushed up by buy-back schemes...not to mention ZIRP and QE! Will someone pass the champagne?

Just look at Amazon! Years ago, we dubbed the company the 'River of No Returns.' Dear readers who did not buy the stock, on our advice, have been nursing a grudge against us for nearly a decade. After all, Amazon was one of the few survivors of the tech bust...and now seems to have the whole world in its hands. The stock, which we judged barely worth $10, is now trading for 40 times as much. And lo...the mighty Amazon must now have at least some liquidity running downriver. At least, that is what we infer from the current P/E, which at 1,426, suggests that there is a positive E to multiply. So, if a share sells for $400...at a P/E of 1,426...the company must be earning...hold onto your hat...26 cents a share.

Why would anyone pay 1,426 times earnings for a company that has a whole decade or more to prove its business model? We now know what the company can do, no? It can earn 26 cents a share. How much is that worth? Well, at 10 times earnings a decent price would be about $2.60 a share. So you see, we were overly bullish when we said the stock should be worth "about 10 bucks."

Then again, Jeff Bezos is a visionary. And his latest vision is of drones flying all over the US and the world...delivering, not bombs, but bouquets, and bedroom slippers, and books! Yes, Bezos dreams of a drone attack to dwarf anything they've got planned at the Pentagon.

We don't think it will happen. Where would they land to unload their packages? How would they avoid power lines and tree limbs? How many heads would their propellers cut off before the tort lawyers were rich and the drones were abandoned? Who would pay for shipping by drone?

Of course, we don't know the answers to those questions. But we do know that 1,426 times earnings is dazzling, dizzying...and downright nutty.

So today, dear, dear reader...we give you an opportunity to recover the money you didn't make when you followed our advice on Amazon 10 years ago. Yes...here's a second chance...a second bite of the apple...another trip down that lazy river. A New Year's present from us here at the Diary:

Sell Amazon!

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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