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Amazon Made a Big Mistake (And It Could Hurt You)

The tech giant has struggled to live up to the delivery expectations of its customers.



The tech giant has struggled to live up to the delivery expectations of its customers.

Across the country, dozens of buildings sit empty or unfinished, a potent reminder that boom times can quickly turn into bust.

Real estate often operates this way. Just over a decade ago, America witnessed its greatest economic downturn since the Great Depression because of this zealous hunger to convert property into profits.

But this time, the culprit isn’t greedy Wall Street investors looking to flip homes and offices. Instead, Amazon Inc.  (AMZN) - Get Free Report is the company holding the proverbial bag of excess real estate that it does not yet know how — or even whether — to use.

During the pandemic, the e-commerce giant rapidly expanded its already vast network of fulfillment, sorting, and distribution centers due to the soaring demand for e-commerce. Amazon now realizes it went too far.

Last year, Amazon closed, canceled, or delayed over 90 buildings, mostly in the United States, according to MWPVL International consulting firm.

One of those projects was the $5 billion second headquarters in Virginia that Amazon announced with great fanfare in 2021 that it planned to build. This year, MWPVL predicts the company will continue to pull back its real estate projects across America and the rest of the world.

E-commerce is Costly — and Hard

Despite booming pandemic sales, Amazon still found it difficult to make money because operating a sprawling e-commerce system, especially one that offers one day or even one hour delivery, is pricey.

In 2022, Amazon reported a whopping $501.8 billion in total operating expenses, more than double just four years ago. As a result, the company’s operating income, which is how it measures profitability, fell 16% from 2020. North America actually lost $2.8 billion.

Even more shocking is this revelation: despite having popularized the idea of buying stuff on the internet, Amazon is still struggling with it, especially when it comes to the so-called last mile of delivery to consumers.

“Amazon’s last mile system is kind of chaotic,” said Burt Flickinger, managing director of Strategic Resources Group in New York.

Until now, Amazon operated a centralized system in which large fulfillment centers would ship online orders to regional and local delivery stations.

But if a fulfillment center nearest to the customer ran out of the product, the company would have to ship merchandise from other fulfillment centers scattered far across the country. The result was increased delivery times and costly delays.

In his recent letter to shareholders, CEO Andy Jassy said the problem grew worse as the system got bigger.

“This challenge became more pronounced as our fulfillment network expanded to hundreds of additional nodes over the last few years,” Jassy wrote, “distributing inventory across more locations and increasing the complexity of connecting the fulfillment center and delivery station nodes efficiently.”

Amazon CEO Andy Jassy.


Revamping its Inventory System

The big takeaway here is that bigger doesn’t mean better. Amazon realized its plan to rapidly build more warehouses and fulfillment centers didn’t fix its underlying problem of matching supply to demand in the shortest amount of time.

So what is Amazon going to do with all of its real estate? According to MWPVL, the company currently has 1,285 “active facilities” in the United States totaling 409.2 million square feet. MWPV also says Amazon planned to build 231 more facilities totaling another 82.5 million square feet.

Fortunately for Amazon, the company was able to sign 5-7 year leases for many properties versus the standard 10-12 years, Flickinger said. So the company will likely just sit on them until the leases expire, he said.

And there will be no shortage of suitors for those leases. Large retailers like Walmart Stores Inc.  (WMT) - Get Free Report and Target Corporation  (TGT) - Get Free Report have been expanding their last mile capabilities as consumers increasingly demand shorter and more reliable delivery services for their online orders.

“For retailers, ensuring a smooth and satisfactory last mile delivery — the final leg of the journey where a product lands in a consumer’s hands — is more significant than ever,” according to a report by Capgemini Research Institute.

“A great last-mile delivery service that delights consumers will go a long way towards attracting and retaining customers,” the report said.

Amazon will also likely still need some of those properties as it reconfigures its network to a more regional-based system.

“We’ve recently completed this regional roll out and like the early results,” Jassy said. “Shorter travel distances mean lower cost to serve, less impact on the environment, and customers getting their orders faster.”

“We’re on track to have our fastest Prime delivery speeds ever in 2023,” he said. “Overall, we remain confident about our plans to lower costs, reduce delivery times, and build a meaningfully larger retail business with healthy operating margins.”

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Book describes Sam Bankman-Fried with little attention span or respect for appointments

The former FTX CEO was reportedly invited by Vogue editor-in-chief Anna Wintour to be her special guest at the Met Gala, only to cancel at the last minute….



The former FTX CEO was reportedly invited by Vogue editor-in-chief Anna Wintour to be her special guest at the Met Gala, only to cancel at the last minute.

Michael Lewis, author of The Big Short, has painted an interesting picture of Sam Bankman-Fried (SBF) in his soon-to-be released book on the former FTX CEO.

In an excerpt of Going Infinite: The Rise and Fall of a New Tycoon published in the Washington Post on Oct. 1, Lewis described several interactions Bankman-Fried had with the media and influential figures prior to the downfall of FTX and his criminal charges in the United States. According to the author, he would frequently play video games in the background of online interviews — his League of Legends exploits are well reported — often giving little attention to people including Vogue editor-in-chief Anna Wintour.

“Sam didn’t want to seem rude,” said Lewis on SBF’s talk with Wintour. “It was just that he needed to be playing this other game at the same time as whatever game he had going in real life. His new social role as the world’s most interesting new child billionaire required him to do all kinds of dumb stuff. He needed something, other than what he was expected to be thinking about, to occupy his mind.”

Lewis added that Natalie Tien, who moved into the role of FTX’s head of public relations and SBF’s “personal scheduler”, said the former CEO cancelled many highly publicized appearances — often at the last minute — for seemingly no reason at all. The Wintour interview reportedly led to FTX's sponsorship and Bankman-Fried as a special guest at the Met Gala, which he ended up snubbing.

“Sam treated everything on his schedule as optional,” said the book. “The schedule was less a plan than a theory. When people asked Sam for his time, they assumed they’d posed a yes or no question [...] All he had done, when he said yes, was to assign some non-zero probability to the proposed use of his time. The dial would swing wildly as he calculated and recalculated the expected value of each commitment, right up until the moment he honored it or didn’t.”

Other in-person showings by Bankman-Fried included testifying before the U.S. House Financial Services Committee in December 2021 and meeting with Senator Mitch McConnell. The appearances marked some of the rare times SBF appeared in public wearing a suit as opposed to his usual T-shirt and shorts — though social media users pointed to footage of the then CEO's shoes slipped on without being tied at the hearing.

Related: Sam Bankman-Fried FTX trial — 5 things you need to know

It’s unclear what other information will become available once the book is released on Oct. 3, the same day jury selection begins for SBF’s criminal trial in New York. Amid the expected court proceedings, a slew of podcasts, news features, books, and other media have been released detailing aspects of Bankman-Fried’s life before and after the downfall of FTX. A 60 Minutes interview with Lewis revealed SBF had plans to pay off former U.S. President Donald Trump not to run for the office again based on the threat to elections and democracy as a whole.

On Oct. 4, Bankman-Fried will appear in a New York courtroom for the first day of his trial, scheduled to run through November. He will face 7 charges related to fraud at FTX and Alameda Research, for which he has pleaded not guilty.

Magazine: Can you trust crypto exchanges after the collapse of FTX?

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How Great Is Our Economy If The Bottom 50%’s Share Of The Nation’s Wealth Has Plummeted Since 2009?

How Great Is Our Economy If The Bottom 50%’s Share Of The Nation’s Wealth Has Plummeted Since 2009?

Authored by Charles Hugh Smith via OfTwoMinds…



How Great Is Our Economy If The Bottom 50%'s Share Of The Nation's Wealth Has Plummeted Since 2009?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Something has been going very wrong in the US economy for a very long time, and whatever is going wrong accelerated from 2009 to the present.

Longtime readers know I've covered America's soaring wealth and income inequality for many years, and so I read economist Noah Smith's recent post entitled Working-class wealth is improving with keen interest. I respect Noah's work, which is why I follow his Substack posts.

Here are some excerpts from his commentary:

"One of the truisms many Americans learned during the 2010s that turned out not to be so true is the idea that the wealth of the working class is relentlessly falling behind. The likely reason that people "learned" this "fact" is that it was true up until the financial crisis of 2008, and people didn't recognize it and get mad about until the crash.

For that we have to turn to the (Federal Reserve's) FRED website. But when we do, we can see that the bottom 50% of households have seen strong wealth growth in real terms since 2012.

Now, 50% of the country's households holding only 2.5% of the wealth is still very dramatic inequality. We should remember that some piece of this is just the life-cycle of wealth -- young people who haven't had time to build wealth and old people who have spent down most of their retirement account will look poor even if they will be comfortable or were comfortable in middle age. But even after accounting for that life-cycle effect, America is going to have very steep wealth inequality.

Trends are important, though. And this trend is a positive one. The fact that working-class wealth has been recovering as a share of America's total wealth for a decade, even as every group has increased its wealth, says that something is going right in the U.S. economy. A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others."

Data hound that I am, I decided to explore the FRED database for charts that would confirm his no-doubt sincerely issued claim that "The fact that working-class wealth has been recovering as a share of America's total wealth for a decade, even as every group has increased its wealth, says that something is going right in the U.S. economy."

What I found is the exact opposite of his claim: the bottom 50%'s share of total assets and financial assets have fallen sharply since 2009. In the greatest expansion of net worth / assets / wealth in US history, the bottom 50%'s share of this massive expansion of wealth has declined by 25%.

Rather than increase as Noah claimed, the working class's share of America's total wealth has plummeted. Let's look at the data, as depicted on the FRED charts. Let's start with the chart Noah referenced, which does indeed show the wealth (net worth) of the bottom 50% rising smartly over the past decade, from a nadir of less than $1 trillion to $3.6 trillion in 2023:

For context, let's look at household net worth, which rose an astounding $90 trillion from $56 trillion in 2009 to $146 trillion in 2023. As the chart above shows, the bottom 50% garnered $3 trillion of this $90 trillion in gains, or 3%. This modest percentage is not supportive of Noah's claim that "A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others."

Here we see the 167 million Americans in the bottom 50% own $3.6 trillion, the top 1% --3.3 million Americans--own $45 trillion, a staggering 12.5X the net worth of the bottom 50%.

The top 0.1%--330,000 Americans--own $18.5 trillion, an astonishing 5X the net worth of the 167 million Americans in the bottom 50%.

Next, let's look at each segment's share of total assets. The bottom 50%'s share of assets plummeted 25% since 2009, from 8% to 6%.

The share of the top 1% soared 26% since 2009:

The share of the top 0.1% skyrocketed 34% since 2009:

These charts show the bottom 50%'s share of America's assets hasn't risen, it's cratered. The rising tide of $90 trillion in additional wealth since 2009 has raised the yachts of the top 1% and the top 0.1% such that the bottom 50% share of assets declined. The bottom 50%'s leaky boat--as measured by their share of assets--actually took on water.

Financial assets are important because financial assets generate income and economic security. let's look at each segment's share of the nation's vast financial assets.

The bottom 50%'s meager share--167 million American's share of the nation's stupendous financial assets--fell 26% from 3.1% to 2.3%--a sliver so thin that it's essentially signal noise.

Meanwhile, the top 1%'s share of financial assets rose 24% since 2009, more than 15X the bottom 50%'s share of financial assets.

The top 0.1%'s share of financial assets soared 34%% since 2009, 6.5X the bottom 50%'s share of financial assets.

Noah's claim of "A rising tide is lifting all boats, and it's lifting the boats at the bottom more than the others." is akin to being behind 49-0 in the waning minutes of the fourth quarter and cheerleading the team's increase in total yardage gained from 11 yards in the 2nd quarter to 33 yards in the 3rd quarter--a positive trend.

Noah claimed the financial metrics of the bottom 50% are a positive trend. If we consider the bottom 50%'s share of total assets and financial assets, this claim is not supported by the FRED data.

Noah then extended this claim to an even larger claim that "something is going right in the U.S. economy."

The message of the Federal Reserve's data depicted in the charts is the exact opposite: something has been going very wrong in the US economy for a very long time, and whatever is going wrong accelerated from 2009 to the present.

Those actually living in the bottom 50% (as opposed to jetting around to conferences) might find Noah's ponderings that the bottom 50%'s impoverishment is a statistical anomaly generated by temporarily impecunious youth climbing their way to wealth, and retirees who spent their wealth and are now comfortably impoverished somewhat risible. The reality is more likely mac and cheese from the dollar store prepared in an overcrowded flat or a trailer park and rapacious credit card interest rates and exploitive late fees.

By all means, let's look at the data before making expansive claims.

*  *  *

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Tyler Durden Mon, 10/02/2023 - 14:20

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SEC continues to delay decisions on crypto ETFs: Law Decoded

The latest delays came two weeks before the second deadline for many applicants.
Despite United States Representatives Mike Flood,…



The latest delays came two weeks before the second deadline for many applicants.

Despite United States Representatives Mike Flood, Wiley Nickel, Tom Emmer and Ritchie Torres calling on the Securities and Exchange Commission (SEC) to immediately approve the listing of spot Bitcoin (BTC) exchange-traded funds (ETFs), the agency once again delayed its decision. 

When it comes to spot Ether (ETH) ETFs from VanEck and ARK 21Shares, the SEC delayed making decisions until Dec. 25 and Jan. 10, respectively, while GlobalX will have to wait until Nov. 21 for the commission’s decision. It also delayed deciding on the spot Bitcoin ETF applications of Invesco, Bitwise and Valkyrie until mid-January.

The latest delays came two weeks earlier than the scheduled second deadline date for many applicants, who had been expecting to hear from the securities regulator by Oct. 16–19. The timing of the delays may have been related to the narrowly avoided U.S. government shutdown, which would have disrupted the country’s financial regulators and other federal agencies.

Bitwise Asset Management reacted to the delay of its spot Bitcoin ETF with an amended application, responding to the SEC’s objections to the product. In its amended application, Bitwise engaged with what the SEC called “the ‘mixed’ or ‘inconclusive’ academic record” on the lead-lag relationship between BTC futures and spot markets.

Another Chinese court recognized Bitcoin as property 

The Shanghai No.2 Intermediate People’s Court in China has recognized Bitcoin as a unique and non-replicable digital asset while acknowledging its scarcity and inherent value. According to the court’s report, digital currencies such as Bitcoin stand out as unique and non-replicable internet technology products. The report states that among a sea of digital currencies, Bitcoin is different and unique from other digital assets. It has key currency features such as scalability, ease of circulation, storage and payment. 

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Taiwan bans unregistered foreign crypto exchanges

Taiwan’s Financial Supervisory Commission (FSC) formulated the critical points for regulating Taiwan’s cryptocurrency market, releasing industry guidelines for virtual asset service providers (VASP) operating in the country. In the guidelines, the authority mentioned standard industry-wide rules like separating exchange treasury assets from customer assets and reviewing mechanisms for listing and delisting virtual assets.

The FSC also required foreign VASPs to refrain from providing their services in Taiwan without obtaining necessary approvals from the regulator: Overseas virtual asset platform operators are not allowed to provide business within the territory of the country [...] unless they have been registered in accordance with the law.”

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Hong Kong will list “suspicious” crypto platforms

The Securities and Futures Commission (SFC) of Hong Kong will publish a list of all licensed, deemed licensed, closing down, and application-pending virtual asset trading platforms (VATPs) to better help members of the public identify potentially unregulated VATPs doing business in Hong Kong. The SFC said it will also keep a dedicated list of “suspicious VATPs,” featured in an easily accessible and prominent part of the regulators’ website.

The new rules come immediately after the ongoing JPEX crypto exchange scandal, an affair that local media outlets describe as one of the worst cases of financial fraud ever to hit the region. JPEX stands accused of promoting its services to Hong Kong residents despite not having applied for a license in the country.

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