AMAZON ABLE TO GO WHERE KOGAN CAN’T

The crunching 33 per cent plunge in the Kogan share price yesterday tells us a lot about the company specifically – our Down Under miniAmazon-wannabe.

It also tells us a lot about online retail more broadly and indeed all retail in a globalised market where local dynamics and delivery remain critical.

It also highlights – heck, loudly announces – the extreme fragility of our Down Under sharemarket in the shadow of a Wall St that is some uncomfortable mix of heightened volatility and teetering, teetering, right on the edge.

In sum and in short, welcome to the wide, wide world of November 2018, counting down to the brave New Year and world of 2019.

There’s an interesting comparison to be drawn between the real Amazon and its Down Under – not to be too unkind, but for accuracy and relevance, I need to stress that mini – wannabe.

This year Amazon’s been flirting with a value of a round and both cool and red-hot trillion dollars. Earlier this year Kogan got close to a value of a billion dollars. And of course the Amazon trillion was real Greenback-type dollars, while Kogan’s billion was 70c-in-the buck Down Under dollars.

After yesterday’s plunge Kogan’s total value was down to $290 million. Yesterday’s one-third loss meant that it had now lost more than two-thirds of that peak value.

In comparison Amazon has come back less than 20 per cent from its peak value just shy of a trillion to something like $US803 billion last Friday; a figure that’s still well over $1 trillion of Down Under dollars.

We are not just talking about the difference between one company and another that is scaled 3000 times. Being Kogan-small really is different. It is also will be very interesting.

Kogan, one should note, operates at a double disadvantage to – many – foreign online competitors. It doesn’t only now have to charge its buyers the GST, it also pays company tax on any profits. Many do neither.

The specific numbers Kogan revealed sort of point to a fragility in non-food retail beyond just online and more broadly. Consumers are very price sensitive.

The same goes for the share market. By any objective measure, either yesterday’s plunge was a big over-reaction to what Kogan actually revealed and what it therefore foreshadowed, OR it had been wildly over-valued the day before.

And if it was wildly overvalued last Friday –

the turbulence of last week – what does that say about its peak valuation earlier his year when it was double that?

While that’s probably an imponderable question, we are seeing a bifurcation of investor reaction.

The Kogan sell-off points to investors with hairtriggers on the sell button. But the broader market surge after Wall St’s Friday re-plunge pointed to investors still wanting to ‘believe’.

They want to believe that, just maybe, now Wall St’s ‘corrected’ (for the third time this year), that the mark downs are done and dusted and we can all go back to basking in the Trump bull market. That it hasn’t been, well, trumped, by a (Jerome) Powell bear market.

Hmm. It sort of reminds me of a sixties pot-head (literally) wearing rosecoloured glasses and tripping out on LSD.

Mostly, everything looks idyllic and Arcadian – that’s to say, well, rose-coloured. But every now and then some monster springs into the view to freak out the brain.