The Donald’s Blind Squirrel Nails An Acorn

It is said that even a blind squirrel occasionally finds an acorn, and so it goes with the Donald. Banging on his Twitter keyboard in the morning darkness, he drilled Jeff Bezos a new one—or at least that’s what most people would call having their net worth lightened by about $2 billion:

I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!

You can’t get more accurate than that. Amazon (AMZN) is a monstrous predator enabled by the state, but Amazon’s outrageous postal subsidy—-a $1.46 gift card from the USPS stabled on each box—-isn’t the half of it.

The real crime here is that Amazon has been exempted from making a profit, and the culprit is the Federal Reserve’s malignant regime of Bubble Finance. The latter has destroyed financial discipline entirely and turned the stock market into the greatest den of speculation in human history.

That’s why Bezos can kill established businesses with impunity. The casino allows him to run a pernicious business model based on “price to destroy”, rather than price for profit and a return on capital.

Needless to say, under a regime of sound money and honest capital markets Amazon would be a far more benign economic creature. That’s because no real investors would value AMZN’s money-loosing e-Commerce business at $540 billion—-nor even a small fraction of that after 25-years of profitless growth.

As we observed a few weeks ago,

AMZN is allegedly a tech company owing to its cloud business (AWS). But that’s exactly the skunk in the woodpile.

When you set aside AWS’ sales and operating income during 2017, Amazon’s e-Commerce business generated $160 billion of sales, but posted operating income of negative $200 million.

That’s right. The monster of the retail midway posted no profit whatsoever last year!

And it’s getting worse. During 2016 the e-Commerce business posted $1.1 billion of operating income on $124 billion of sales; and the year before that (2015) operating income was $2.6 billion on e-Commerce sales of $99 billion.

Stated differently, incremental annual sales of $61 billion over the past three years resulted in a $2.8 billion reduction in operating profit.