<p>Theoretically, among the heavily discounted names in the markets, Amazon (NASDAQ: AMZN) seems a solid opposite purchase. Due to the escalating situation with coronavirus from China, many companies and events are closed indefinitely, either by election or by mandate. Still, people have to buy things, one thinks, so this dynamic always benefits the Amazon stock.
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There is ample evidence to support AMZN’s bullshit, and they are not just based on logical deductions. For example, Teladoc Health (NYSE: TDOC) increased absolutely this year and gained almost 40%. During the coronavirus panic, the optimism that drives TDOC is understandable. As an app that connects patients to healthcare professionals via teleconferencing technology, this platform eliminates face-to-face contact.
Of course, this is the same driving force behind the Amazon stock: people can get their shopping done without having to wait in line, possibly with other sick people. Therefore, I thought I would write a positive story about AMZN.
However, as the disease known as Covid-19 has begun to spread to most states and infected at the time of writing nearly 2,300 people, one factor became very clear. It is not the coronavirus itself that people need to worry about. Instead, it is the ensuing panic.
In 1975, the United States had nearly 1.47 million hospital beds for a population of about 219 million. It’s a hospital bed for every 150 Americans. According to the Washington Post, there are only 924,100 hospital beds for a population of about 331 million. Do fast math and you get one bed per 358 Americans, or a 139% increase in demand per capita.
Honestly, we just do not have the availability to meet this critical demand, which could greatly affect the Amazon stock.
Amazon stock does not control its fate
Recently, the mainstream media had a field day with the Centers for Disease Control and Prevention’s worst-case simulations, which predicted up to about two-thirds of Americans who contracted the disease and perhaps up to 1.7 million deaths. As the New York Times Sheri Fink states, this is a sobering thought, but it comes with a caveat: it does not take intervention into account.
But the reality is that the United States must act quickly and decisively, perhaps in an unprecedented way. Again, it is not the coronavirus – as far as we know it is not a death sentence at all. And yes, there are many other things to worry about, such as “ordinary” flu, natural disasters, car accidents, nuclear war, etc.
However, there are other things that one can worry about keyboard comments can not deny a fact: coronavirus is an additive threat. This means that worrying about other things will not alleviate your Covid-19 exposure an iota.
Therefore kicker: people who flood and quickly overwhelm healthcare will exacerbate all the things we should be worried about. Frankly, it does not matter if the coronavirus is a real threat or not. Unfortunately, it is the panic that kills people much more than the disease.
In that scenario, I do not see this as a positive for the Amazon stock. What would you buy anyway?
In addition, I predict serious risks for AMZN if the federal government does not regain social control. Since the start of the Great Recession, the path for Amazon equities and the consumer sentiment index has shared a correlation strength of 77.2%. In other words, when consumer sentiment moved higher, so did AMZN.
But what if sentiment diminishes, which it would surely do if this crisis worsened? Will Amazon stock fall as well? If it follows established trends, the answer is yes.
Hopeful but realistic
As you probably guessed, I closely monitor coronavirus development. What I would like to do is find a reasonable middle ground between the world’s forecasts and those who treat this as just an extended flu season.
Here’s the gist: we can control and contain coronavirus and mitigate its broader impact. As you probably know, South Korea has done an excellent job of flattening its infection curve before turning into a China-like epidemic. Nevertheless, the Korean government achieved this through aggressive testing and containment efforts.
Do we have what it takes to do the same here? Admittedly, I have my doubts. In this country, identity politics has gone out of hand. Unfortunately, we have created political, social and racist divisions. This is truly a time to come together and help our fellow human beings. Instead, we scapegoat and stigmatize people and end up goods like crazy to the point where our fellow man can not even wipe the back.
If we lived in a rational society, I would probably be everywhere in the Amazon. Since we live in America, I think it’s a wise choice to wait.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker larger contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights for the investment markets, as well as for various other industries, including law, construction management and healthcare. At the time of writing, he had no position in any of the above-mentioned securities.