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Hit the tape yesterday that AMZN was going to start offering their Fire Phone for 99 cents with a contract. The business of selling cell phones is not entirely clear to me--clearly AMZN gets some economics out of the 2-year contract but Im not sure to what extent. Throw in the fact that AMZN doesnt break out the R&D on the silly phone so we dont really know what the unit cost is, and you can see how this has the potentially to go horribly awry. Now, if the Fire Phone is a disaster (which it looks like it is), can AMZN absorb it? Of course, it is AMZN. And investors have always assumed that AMZN is losing money over here but making it up over there. But I dont think thats a safe assumption. If the whole enterprise is a slightly-less-than-breakeven endeavor, is there any unit which is consistently profitable? Books, apparel, electronics? I dont know, because we cant do that analysis. Does anybody other than me think its weird that AMZN doesnt break out that data and let the analysts analyze? This is like when the Fed got rid of M3 and then went to print 4 trillion dollars. What does AMZN have to hide? If we had access to that information do you think we would have a better or worse appraisal of AMZN? It would be easy to say that the Fire Phone is a disaster and that this is the top for AMZN but there are a lot of points in time where you could say that this was the top, and besides, I think everyone agrees that the top tick was the drones episode on 60 Minutes. Although I have to admit, the debate that the drones started up was pretty entertaining, with a minority of people

saying they would shoot them out of the sky.

Source: Bloomberg I think the silliness at AMZN is approaching three ring circus levels. If I could embed sound files in a pdf I would play Entrance Of The Gladiators here. Juxtaposed with the iPhone 6 announcement, and it should be clear that nobody cares about the Fire Phone. AMZN failed at something. That might be news, but AMZN tends to do a pretty good job of throwing dirt on its failures, going all the way back to Kozmo.com in 2000, and more recently, blowing $175 million on Livingsocial. That is just what I found in 2 minutes on the internet. Google throws spaghetti against the wall, too, but the difference is that Google mints gold coins. The Fire Phone failure is big, and public. Nobody wants them even if theyre free.

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Top-Ticking Sports The timing on my SHORT SPORTS piece from last week was uncanny. As you know, the NFL is embroiled in a controversy whereas a star player punched out his girlfriend in an elevator, was suspended for two games, but when the video became public, was suspended even more. Many, including Keith Olbermann, think that the league had knowledge of the existence of this video. I dont know the situation well enough to say, but Occams Razor usually applies in cases like this. When I saw the video, I almost fell out of my chair. Youd think it would be hard to shock the fans of a sport who tolerated a serial killer, but when you see the brutal violence of that attack on tape, it really unsettles you. So lets say you are a football fan, and youve seen the video, and you think it is likely that the league covered this up, do you go out to the parking lot of the stadium and crack open a beer and paint your face purple and say, Go Ravens? Naturally I have an axe to grind here, but being as objective as I can, I think there is a very good possibility that we might have just witnessed a turning point in professional sports, at least football. Its getting to the point where you, as a fan, have to live with your conscience when you support this league, financially or otherwise. I cant think of another time in history where a professional sports league had any moral significance whatsoever. We are rapidly approaching the point where it is immoral to root for a football team. Dennis Gartmans cockroach theory might also apply here. My guess is there will be more bad news before there is good

news. I feel pretty strongly about this sports short. Lots of cognitive dissonance around here. Liberal university professors in the South cant help but root for their Razorbacks or Gamecocks or Tigers.

Luxury So a disclaimer, here, I did a tiny amount of research on luxury but there is so much to know, I am just scratching the surface. I was hoping to learn everything and write a nice, compact piece. But it is very messy, and complicated. And the biggest thing is that you cannot generalize about luxury as an asset class. People have tried. They have made an ETF and such. Well, at least until it got delisted. Which is kind of my point. Anyway, quick background here. As many of you know, for most of my adult life I was a cheap you-know-what, which is part of that whole Calvin Coolidge flinty New Englander thing, partly because one side of my family has a pathology about spending money. I have a relative with a seven-figure bank account who never stayed in a hotel room with a minibar until he reached the age of 70. Try that one on for size. So if I walked into a Saks or Barneys in 2004, I would have been one of those folks who gets asked to leave (and probably frisked), but in 2014 I can mingle freely in there. Trying to decide if I should tell you the story or not. Maybe some other time. Anyway, one of the things I have figured out about buying luxury (I buy nice shirts and pants) is that the stuff lasts forever. I was very shocked to find this out. I was used to Brooks

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Brothers shirts getting frayed and falling apart in about 9 months. Planned obsolescence, I guess. I am finding that the nice stuff lasts forever, which is a good problem to have. I guess by strict mathematical definition I am a one percenter, but Ive never lived like it, which has been the secret to my success. But once you get to age 40 and youve spent your whole life saving until it hurts, you kind of have to ask yourself, what are you saving for? I enjoy shopping, but lots of times Ill walk into a store and turn around and walk out, because I dont need anything. I digress. Anyway, there are two kinds of luxury, there is true luxury, like LMVH and Hermes and stuff like that, which is not even for the one percent, but for the .01%. You would be surprised at how big of a market that is, because you do not need to sell too many $25,000 pieces of luggage to move the needle. Then there is aspirational luxury, which is COH and KORS and Kate Spade and formerly Hilfiger and stuff like that. Not to sound like a snob, but this is stuff that kind of pretends to be luxury but will fall apart in 9 months like the Brooks Brothers shirt. This is the kind of stuff they love here in MB, at the Coach outlet, which is hugely popular down here. You go to the outlet mall, youd never know that COH stock was in the toilet. The store is always hopping. Though if you think about it, that shouldnt make sense, because a true luxury brand couldnt possibly do well in Myrtle Beach. Coach in particular got too big and diluted their brand, and lost their way, strategically speaking, and they are in a position from which

they may never recover. You might think it would be hard to go out of business selling $600 bags, but COH is on its way.

Source: Bloomberg You might wonder how a luxury brand like COH takes a nap in the dirt in the midst of all this inequality, but the problem is they let their brand become middlebrow. If you want my opinion on how to invest in this stuff, go as true luxury as you possibly can. Think about it this way. Those Dr. Horton/Lennar housing developments you see going up? Think about what those are going to look like in 25 years. There is quality and then there is quality. The Americans also have no idea how to do this stuff. They have some success and then expand and expand and expand to the point of absurdity. Tune in next time, maybe, when we talk about Tiffany, which most people consider to be the proxy for the entire space.

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