By: Kent Engelke | Capitol Securities

According to Barons, Amazon has made about $5 billion since going public in 1997. According to Bloomberg, its capitalization is about $480 billion. Last year, Exxon made about $7.8 billion or about 56% more than Amazon has made in 20 years. Exxon is worth about $348 billion. According to Bloomberg, Exxon is up about 168% since 1997, while Amazon has increased an incredible 57,405% since that period.

If companies are valued by earnings less some interest rate, the obvious conclusion is that Amazon is vastly overvalued as compared to Exxon.

The point that I am trying to make is that markets are not always rational. At some juncture, companies will be priced according to the value of its cash flow. The question is when.

Several times I have quoted the WSJ stating that about 41% of 2017’s NASDAQ gains were focused in five stocks. In 2000, 60% of the gain was in about 50 stocks. I have further commented about the vast concentration of wealth in one sector, a concentration of historic proportions. The reason for this massive concentration is the proliferation of ETFs and technology based trading.

Many high profile luminaries have voiced concerns about this concentration, further stating that ETFs could potentially be a nuclear weapon given their apparent opaqueness and proliferation. In their eyes, it is not a question as to if there will be considerable issues, but rather when.

While I do not necessarily share the above view, I do think the averages can decline 7% to 10% in relative quick order, the result of ETFs and electronic based trading. I do believe however, if Trump’s legislative agenda is passed, Main Street will greatly outperform Wall Street.

There is little I can write about yesterday’s market action. Treasury yields crept quietly higher. Crude fell while technology shares rose nominally.

Last night the foreign markets were mixed. London was up 0.34%, Paris was down 0.06% and Frankfurt was down 0.03%. China was down 0.90%, Japan was up 0.29% and Hang Sang was up 0.51%.

The Dow should open nominally lower as the firing of FBI Director Comey night be viewed as a possible impediment or distraction in accomplishing the administration’s regulatory and tax reforms. The 10-year is up 6/32 to yield 2.38%.