Beware friends bearing low prices. Amazon. Capital Destroyer, Beserker of Retail and Unemployer of Legions

Who is hunting down the brick and mortar retailers and snuffing them. And, the killing fields are growing, from 2014-2016, 12,000 stores closed. Detectives estimates that from now to 2019 the killer will strike 30,000 more times.

What if you knew who did it? Would you tell? What if your best friend was the culprit, or your spouse or child, would you tell? Or, would you not? This is not only someone you love, but they also give you huge discounts on everything! Whatever you want, you tell them and within 48 hours it’s on your doorstep

What if the businesses that are being hunted and skinned are healthy, these are not the infirm. This is an extinction event. The merciless one is overfishing the fish in the sea.

And what if the world’s ecosystem, everything from opportunity, social and career advancement, jobs to food on the table to generational wealth to education was being torn apart.

And what if you could stop the slaughter, would you?

What if your misplaced sympathies make parasites hugging the killer bigger and stronger, feeding not on the host’s blood but on the nourishment that is siphoned from victim, thru the killer and into the mouths of its sycophants.

And all you get is small discounts.

What if one of the powers of the killer is fooling it enablers, getting its parasites on tv, calling them pundits and they in turn plead for you not to kill the killer. ‘The killer is your friend, love it!’ What then.

I have caught the killer, pinned it to the ground, will you strangle it to death with me, or strangle me to death, releasing the killer?

I am stopping Amazon, will you?

Amazon is a giant predator motivated by false incentives to destroy perfectly serviceable assets, business operations and jobs.

Amazon’s stock is trading above the $1,000 mark. That means its market cap is in the financial stratosphere at $478 billion.

But Amazon is 24 years-old, not a start-up. And it hasn’t invented anything explosively new like the iPhone or personal computer. Instead, 91% of its sales involve storing, moving and delivering goods — a sector of the economy that has grown by just 2.2%annually in nominal dollars for the last decade. There is simply no macroeconomic basis for Amazon’s insane valuation.

Yes, it’s taking market share by leaps and bounds. But that’s inherently a one-time gain that can’t be capitalized in perpetuity. And this “growth” is generating new competition as the stronger elements of the bricks and mortar world are now piling on the e-commerce bandwagon.

After nearly three decades of operation, Amazon still generates limited operating free cash flow relative to its nosebleed valuation. In fact, at today’s magic $1,000 per share, Amazon is being valued at 51X its last twelve months (LTM) operating free cash flow.

And that gets to the larger point about Amazon’s predation and value destruction. Between 2010 and 2016 Amazon’s net sales exploded from $34.2 billion to $136 billion. But its pre-tax margin, which was already thin at 4.4% in 2016 clocked-in at just 2.9% in the year just completed.

Stated differently, on sales growth of $102 billion, Amazon posted only $2.5 billion of pre-tax profit gain. Indeed, apart from its cloud business (AWS) Amazon is essentially not a profit-making institution at all.

I will readily grant that Bezos is a visionary and great capitalist innovator, builder and disruptor. But I would also lay heavy odds on the probability that his business strategy might be dramatically different — and far more profit oriented — under an honest free market.

In fact, based on the true facts of the Amazon e-commerce juggernaut, I think Bezos’ assault on the bricks and mortar sector would be far less menacing and reckless. And that’s giving full credit to the fact that online shopping and nearly instant delivery of goods is an enormous consumer boon that would be making great inroads even in an honest free market.

But it wouldn’t happen nearly as rapidly, wantonly or disruptively, because Amazon would be required to post a reasonable profit. And its stock price would reflect that reality, instead of riding the ridiculously false highs of Bubble Finance.

Indeed, the virtually profitless e-commerce monster that just keeps spending and expanding like some sci-fi blob is surely a measure of the mania at loose in the casino. Every dime Amazon takes in is being recycled to more distribution centers, package handlers, hired delivery trucks and drone prototypes, the entire system sucking blood from taxpayers in the form of staggering postal subsidies and hard dollar grants financing its building, transferring that shareholder burden away from its balance sheet, and unto ‘ours’

So Bezos’ e-commerce business strategy is that of a madman — one made mad by the fantastically false price signals emanating from a casino that has become utterly unhinged due to 30 years of Bubble Finance policies at the Fed and its fellow central banks around the planet.

It’s merely unleashed a rogue business model and reckless sales growth machine that is just one more example of destructive financial engineering, and still another proof that monetary central planning fuels economic decay, not prosperity.

When it is finally captured the damage will have been done, irrevocably. Amazon and its shareholders leave behind the Labria tarpits of retail carcasses and jobs. You got a product a little cheaper and free shipping

Amazon

h/t David Stockman