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Market Recon: Prime Day in Retail; There Will Be Blood

Prime Directive: a guiding principle of the United Federation of Planets prohibiting the protagonists from interfering with the internal development of alien civilizations. -- Star Trek

Not That Prime Directive Happy Amazon Prime Day! You probably witnessed the Tech sector lead the markets yesterday. If you did, then you probably also witnessed multi-line retailers get their faces ripped off across the industry as well. Yesterday's catalyst? Amazon (AMZN) , the tech retailer, of course. Perhaps it was the fact that many shoppers had waited for Prime Day to make purchases that they knew they needed to make. Perhaps it was the news that Abercrombie & Fitch (ANF) will not be selling itself. Could they, even? If not, what's behind door number one and door number two? Perhaps the fear was behind door number three. News broke that Amazon will be directly competing with the likes of Best Buy's (BBY) Geek Squad installation and repair services. Ouch.

So, on a day when as a sector consumer discretionary stocks squeezed out small gains, ANF was surrendering 20%, and BBY 6%. Macy's (M) , Kohl's (KSS) , Walmart (WMT) , Foot Locker (FL) , Nordstrom (JWN) and TJ Maxx (TJX) -- a stock in the Action Alerts PLUS portfolio, which Cramer co-manages as a charitable trust -- and a host of other retail names all gave up multiple percentage points.

Who's afraid of the big, bad wolf? Oh, I think we know who. Since May 2015 -- which, by the way, is not so long ago -- total enterprise value of the top 20 retailers has dropped from $1.1 trillion to $870 billion, according to FactSet. Total enterprise value, for those curious, combines market cap and a firm's net debt. That data was compiled prior to yesterday's blood-letting, too. Where does this all go? Is traditional retail absurdly cheap here, or simply a baited hook?

Prime Day serves to attract more potential customers to plunk down the $99 for an annual subscription. Each new customer represents gained market share for Amazon, and permanently lost revenue for bricks-and-mortar retail. How many of these names simply disappear? Many of these names, despite obvious value and for the time being at least, dependable dividends have to be considered speculative investments at this point. Now, gang, Prime Day extends into new markets such as China and India. Should Alibaba (BABA) start to worry? There will be blood.

Trap, Crackle...


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