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Sales tax on online shopping coming?

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I read two news this week, which makes me think this is coming. Keep in mind many local governments are upside down in terms of budget and debts, any tax revenue helps. Collecting tax revenue from online merchants in remote places like Seattle (HQ of Amazon) is a convenient choice.

Expedia (Nasdaq: EXPE) tax lawsuit (source: hotel-online): from my reading, basically the dispute is around the basis of tax, we know Expedia sells hotel room at discounted rates, but the local government (Columbus, GA in this case) think it should be the listed price. I am not lawyer but I lean towards the discounted rate.

Amazon may stop doing affiliate business. Quote WSJ Amazon Threatens Cuts Over State Taxes:

The Wall Street Journal reports that (Nasdaq: AMZN) may stop doing business with some of its marketing affiliates over state taxes.

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Close AMZN puts, Portfolio update

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I closed the Amazon Feb $65 puts last Wed, when I saw the stock dropped to around $68, which is the low point the day after it released Q4 earning.

Lesson learned:
1) short/put a stock is much harder than I thought. I started this trade because I saw EDU, AAPL, and VMW all dropped big after missing earning. But I have hind-sight bias on them: things are always clearer on rear view mirror. I did not know EDU will issue a so-so guidance for this Q; I did not know iPod suddenly stopped growth, iPhone did not sell as fast as Steve wanted, and Mac computers are expensive considering consumer slow down.

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I bought AMZN puts

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This is my very first option buy. After I “buy to open” on this $65 put, I don’t know how to realize the gain, if any. So I called the broker and asked for help online, both came back with answer “sell to close”. That made me more re-assured. The option terminology can make one head spin (I am sure my wife is in that camp), here is some introductions on investopedia.

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Forgot to buy VMW puts

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I thought about it early Jan. after reading from San Jose Mercury News that VMW is the No. 4 software company, in terms of market capital (about $30 b as of yesterday). But I put down the earning date (Jan 28) on my Google Calendar (not Yahoo), and it did not send out reminder email as Yahoo does. So I missed buying the puts before earning. Interestingly, here is today’s price change of the puts options for VMW (expires Feb):

$60: $0.85 => $7.30 (up $6.45, or 759%)
$65: $1.40 => $11.00 (up $9.60, or 686%)
$70: $2.65 => $15.80 (up $13.15, or 496%)
$75: $4.30 => $20.60 (up $16.30, or 379%)

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Congrats to Bill Miller

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Today Bill Miller must be very happy, as his fund (Legg Mason Value Trust) core holdings Amazon (5% of $20 b, roughly $1 b) went up more than 20%, this is the second time AMZN came out with a blockbuster quarter this year, and the stock has been up more than 100% in the past 6 months. I think his AMZN made more than $1 b for his clients in a year or so. Last year, largely due to the underperformance of AMZN, Bill Miller’s fund did not beat the market. Many people laughed at him, but he believed in himself.

Would like to talk a little more about AMZN. I believe most people know they are the largest online retailer, they sell things from books to mobile phones.

But in recent years they have used their experience in building online store, and information technology to expand in related areas. They build stores for other retailers, as we can see the “other” options when look for things, in some cases Amazon’s price may not be lowest. This is OK because they still collect money from their partners when customers buy from the partners. Arguably their profit margin on the “3rd party store” is higher than their own store.

They have this “Amazon Marketplace”, which is similar to eBay, and is gaining popularity lately. Their developer program and other web services also bring values to small retailers. Just like I talked about “what exactly is Google, Apple or MasterCard”, we are still trying to figure out what exactly is Amazon.

But when we all figure out what it IS (and its potentials), maybe it’s time to sell the stocks. I’m glad I don’t need to worry about that, it’s bill’s problem 🙂

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