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LEGAL TENDER

Cody Gunn is co-host the world's smallest, least influential radio show every Wednesday with the best lawyer he knows, Alex Thomason. You can listen on KOZI Radio every Wednesday morning at 10:30 A.M.

 

U.S. Stock Market Update - Word On The Street

Cody Gunn, CFA, President of Gunn Capital Management, LLC:
“I think the China currency devaluation is being overplayed because in essence the currency is still being manually pegged to the dollar and its volatility is tightly managed,” Gunn stated. “China is in the process of adjusting to lower growth potential and the rest of the world is in the process of adjusting to that as well. This will take some time. It is also important to note that a lot of the drama around China began with the huge stock selloff that has been happening over there for several months but in China the correlation between stock performance and economic expansion is pretty low.”

He urges investors to take a long approach to U.S. markets as, “the U.S. economy will be larger ten years from now and stocks will be higher as well. There are some great values to take advantage of today so ignore the volatility.”

 
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Grocery Wars: Can AmazonFresh Grab a Place at the Nation's Table?

Cody Gunn, president of Gunn Capital Management, LLC in Brewster, Wash., also wondered if Wall Street’s intensifying pressures on Amazon to show real profits will “cause Amazon to focus on its core business more than expanding periphery businesses like grocery distribution.”

He pointed to the recent third-quarter results where Amazon reported revenue of $20.58 billion but a loss of $437 million. Said Gunn, you have to wonder just how patient Wall Street will be if Bezos commits to spending what Gunn believes would have to be “huge” amounts to win Amazon a toehold in groceries, especially given how low-margin it is.

Amazon would also have to compete on price with Wal-Mart and, said Gunn, which would further pressure the company’s ability to show a profit. At the very least it would take Amazon some years to build a real grocery business.

Will Wall Street have the patience to wait out the losses that would likely arise in the buildup? No one knows. But, said Gunn, with losses at Amazon probably rising this year, “the company will have to focus in on its core businesses.” Groceries, he said, aren’t part of that. That just may mean that Amazon will find itself backing off groceries to pursue businesses with higher returns.