Wall Street loves conglomerates that are oligopolies or, better yet, monopolies — companies with a “wide and long-lasting moat,” as Buffett said.
By Wolf Richter for WOLF STREET.
Amazon officially announced a deal today that has been consummated months ago: the purchase of 11 aging Boeing 767-300 jets, seven from Delta that it had retired in the second quarter and four from Canadian airline WestJet, to be converted to freighters and enter operations for Amazon Air.
The four WestJet planes, which Amazon today said it had acquired in March, are now undergoing cargo conversion and are expected to enter Amazon Air operations this near. The seven Delta planes will enter operations in 2022.
On August 31, the FAA had issued a direct registration to Amazon.com Services LLC for the first of the 11 planes, Paxex.Aero reported in early September. The plane had originally entered passenger air service in 1991 for Quantas and for the past five years flew for West Jet. In March, WestJet put it into storage. In mid-August, it was moved to Amazon.
Until this purchase, Amazon had only been leasing its cargo jets. But given the collapse in passenger air traffic, and the many planes parked around the globe, it was time to go shopping.
“Having a mix of both leased and owned aircraft in our growing fleet allows us to better manage our operations, which in turn helps us to keep pace in meeting our customer promises,” Amazon said in the statement.
In June 2020, Amazon announced leasing an additional 12 converted 767-300 cargo jets from Air Transport Services Group (ATSG), for a ten-year term. One of the planes entered Amazon Air cargo operations in May 2020. The remainder will be delivered this year. That batch brought its leased fleet “to over 80 aircraft.” The purchases announced today will bring its total fleet – leased and owned – to over 90 aircraft.
All of Amazon’s aircraft are operated by third-party air carriers, and the purchased aircraft will also be operated by third-party carriers, Amazon said today.
These third-party carriers include Atlas Air, Sun Country, and ATSG through its subsidiaries such as ABX Air (formerly Airborne Express). Sun Country was bought out by private equity firm Apollo Global Management in 2017. Atlas Air, Sun Country, and ATSG have sold warrants to Amazon, which it still holds, giving Amazon the right to purchase shares of these companies at a set price, and have some influence.
One of Amazon Air’s leased planes, operated by Atlas Air on a regular trip from Miami to Houston, crashed in February 2019 into Trinity Bay, about 30 miles southeast of George Bush Intercontinental Airport. Both crew members and the only passenger were killed. Muscling into the air transportation business is not without risks.
Amazon has moved fast. It started getting into the air cargo business in 2015 with trial cargo runs out of Wilmington Air Park. By December that year, it announced that it would launch its own cargo airline. At the time, it was already negotiating to lease 20 Boeing 767 aircraft.
Now Amazon has two air hubs, one at Cincinnati/Northern Kentucky International Airport and one at Leipzig/Halle Airport in Germany. It has regional hubs and “Gateway facilities” – used for one-day shipping – at airports across the US and in numerous cities around the world. And it will soon have over 90 cargo planes in service. These are starting to be substantive air cargo operations that have come practically out of nowhere.
These air cargo operations complement Amazon’s ballooning empire of ground delivery services and fulfillment centers.
Just over the month of December 2020, effectively in the three weeks from December 1 through 22, Amazon announced eight new facilities: seven fulfillment centers and a delivery station.
- December 22, 2020: Announced a new 1 million square-foot fulfillment center in a suburb of Lafayette, Louisiana.
- December 22, 2020: Announced three new facilities in San Antonio, Texas, a new 1 million square-foot fulfillment center, a new 750,000 square foot fulfillment center, and a new 350,000 square-foot delivery station.
- December 18, 2020: Announced a 640,000 square-foot fulfillment center in Sioux Falls, South Dakota.
- December 17, 2020: Announced a new 1 million square-foot fulfillment center in North Little Rock, Arkansas.
- December 7, 2020: Announced a new 1 million square-foot fulfillment center in Missouri City, Texas, where “associates will work to pick, pack, and ship bulky or larger-sized customer items such as patio furniture, outdoor equipment, or rugs,” in a sign of our times, given the surge of online purchases of these items during the Pandemic.
- December 3, 2020: Announced a new 1 million square-foot fulfillment center in Oklahoma City, where, you guessed it, “associates will work to pick, pack, and ship bulky or larger-sized customer items such as patio furniture, outdoor equipment, or rugs.”
Fulfillment centers fall under the commercial real estate category, “industrial,” and this category, unlike retail and hotels, has been white-hot throughout the Pandemic, with Amazon being the biggest player in it.
In addition, Amazon has massively expanded its ground delivery operations. One of the elements is perhaps the most visible: The Delivery Service Partners program, under which Amazon helps launch smaller independently owned companies “with up to 20-40 vans,” Amazon-branded vans. These companies are totally dependent on Amazon, with Amazon not only being their only customer, but also the provider of the software services needed for the deliveries, leasing of the vans, etc. I now see those vans in San Francisco all the time. They’re everywhere.
In addition to all its online retail operations, third-party vendor platforms, cloud services including government contracts (AWS), brick-and-mortar grocery stores including Whole Foods Market, book printing (it prints my paperbacks), book publishing (Amazon Publishing), plus brick-and-mortar book stores, a shoe business (Zappos), myriad of other retail oriented products, including tech products, on top of which is Alexa that it tries to push into every bedroom, car, and laptop (Alexa enabled devices), and its huge foray into movie production (Amazon Studios), video streaming and rental (Amazon Prime Video), plus Amazon Music, and its move into online advertising to compete with Google and Facebook, and whatnot… in addition to all these services and products, Amazon is becoming a gigantic, complex, and layered logistics operation, on the ground and in the air, whose goal is not raking in profits, but delivering Amazon packages to households within the shortest period of time at the least cost for Amazon.
And if it loses gobs of money on those operations that it uses to gain market share in its retail business, so be it.
Wall Street loves conglomerates that are oligopolies and better yet, monopolies – that have a “wide and long-lasting moat around it,” as Buffett said. And shares have surged, with the company’s market capitalization at $1.6 trillion (OK, that’s down 9% from September 2), for a dizzying PE ratio of nearly 94. Armed with this huge market value, Amazon in turn has near unlimited access to capital – it has $77 billion in short- and long-term debt – to do whatever with, including buying aircraft. For other companies that have to deal with Amazon in one way or the other, the motto is, don’t get trampled.
Tesla’s market capitalization is higher than the combined total of Toyota, Volkswagen, Daimler, GM, BMW, Honda, Ford, and Fiat-Chrysler. The zoo has gone nuts. Read… Tesla Finally Almost Hit 500,000 Deliveries, Two Years Behind its Promise, for a Global Market Share of… 0.7%
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Reminds me of Sears and the railways.
Wolfe forgot to mention Amazon’s robots and drones!
Those drones are still vaporware, they might eventually use them in very limited instances, but, I highly doubt those drones will ever fly in the rain. It’s hard to plan deliveries when the drones can only work on some days. Also, if it starts raining suddenly, they would have to land them right away, which could cause problems. In order for those drones to fly in the rain, they would have to be big enough, that safety concerns and accidents would happen. Also, I don’t see how the money, ever supports the use of drones. Typical industry uses for drones don’t involve flying drones directly to people’s houses, especially, when children and pets may be present.
Various warehouse robots are available to the public and should come down in price over time.
As for Amazon vs the big B&M stores, I still say the cheapest way will win. Costco & Sams Club are cheaper than Amazon and they have groceries. Consumer electronics spending is probably about at it’s peak and I don’t expect online to win this category later on.
If pharmaceuticals goes door to door, That industry will quickly become crowded. I imagine the hospitals will try to take over their local markets somehow.
Amazon still sells alot of books and various items like video games and DVD’s that are going all digital. Amazon might succeed going forward with the kindle and dominate eBooks for the foreseeable future, but, I don’t see them winning other categories like music, movies, and video games. They are trying though.
Online stores hold the advantage for variety of fashionable clothes and certain household items, but, who will win those categories, is up for grabs.
All in all, I think amazon is being risky, they should try to actually win specific categories, rather than going for broke and trying to take it all. Their supply chain is based around speed and we’ll have to see if they can actually be the cheapest for large items like furniture. While, they can scale up well, scaling down when you need to is equally important.
ePharmacy has big become in India of 135 billion people. AmazonIndia yet to enter & watching it closely & may buy out any one of the top4 players . Pharmeasy,1mg etc (top 4 players ) routinely discount 15% on MRP & another 5% if you buy more than ₹1000(14$). Delivery is free & “Cash on delivery” is also avialable for $0.50c extra fee . you can pay online payment portals like amazonpay/payth & may earn extra 5-10% discount .These epharmacies have a battalion of young cheap doctors on payroll who call you moment you upload prescription (to verify). there are more than 10 bigmetros with 10 million population & 50 metros with 1 million population +. Each city has a fulfilling pharmacy . delivery agents deliver by scooter & operated by the epharmacy portal.
Tolkapiam, I have a question for you. Do some people in India have prescription insurance plans like some have here in America usually thru their employers or is India a “cash to play” system for medications i.e. out of pocket?
JK, Indian Judicial Courts have correctly ruled eternal monopoly drug patents as “Evergreening” and illegal thus making medicine far less expensive. Likely makes drug insurance not needed. Another example of US inferior healthcare system, and inferior judicial system.
And someone explain to me why drugs are advertised on TV?
Are our Doctors ignorant? Or complicit? Are they being pushed around to keep using the latest stuff? Is it all just a perpetual profit scheme, preying on people’s health fears? Are new “conditions” being invented just to sell cures? Are some cures just for taking other cures?
Totally rhetorical, I know the answers.
Who takes all this medication ??
I am in a wheelchair when I go out .. my drivers are a group of MaxiTaxi’s that I trust with my life .. they are all from India .. they travel home regularity & what they tell me is a horror story regarding corporate responsibility .. the cancer epidemic that is sweeping India .. & no reliable healthcare at all.
RN radio presenter Amanda Vanstone .. talked about how little or no regulation there is in India regarding the manufacture of Prescription & otherwise Medications & how these dangerous concoctions are flooding the world.
Unfortunately, there is almost nothing you put in your guts that you know what’s in it or where it came from.
Swallow and take your chances, I guess.
I can now get my prescriptions filled at my Drs office. It’s a vending machine set up. I have also seen the same machines in hospitals, used by employees.
The order goes in, it is filled at a pharmacy and sent via pneumatic tubing to the machine. Very easy for me, no extra trip as I get my meds before I leave.
In india peopple buy health insurance themselves or corporate employers offer medical insurance. health insurance is only useful/needed if you need emergency hospitalisation/surgery. Govt free hospitals are quite shabby & highly corrupt. prescription medicines are 1/12 th of usa prices. only 2-5% of population have health insutance. dirt poor go to free govt hospitals. rest get opd/Consultation from thousands of private doctors (can be as low as 3$ to 7$ per visit). I had bluecross for a 3-6 months & then had kaiser permanente for my infant child while i was in california usa. I dont have a health insurance in india even though annual premium ($500) is tax deductable .but I have not been sick last 10-20 years.(i will need only if i have a heart attack or automobile accident&asmitted to ICU in a coprporate private hospital)
Since I have a background in pharmacy, I can get (mostly any one can ) antibiotics,pain killers etc (except anti psyhcotic) from pharmacies here.
many sick people from middle east /africa come to india for medical tourism with their entire family like a holiday. Medical tourism /dental works /surgeries are big business in india.
Drones are loud. People will not want them flying in residential neighborhoods. The FAA does not want them near airports or helipads. Even if you get a license, you are not supposed to fly them over people. Amazon laid off people in their drone division.
Y’all need to look up “Atlas Air Flight 3591”, which was the 767 crash disaster into Trinity Bay that killed the pilot, co-pilot, and a jumpseat passenger.
Pilot error, according to the NTSB. Chilling, just how incompetent and inexperienced both the co-pilot (who had his hands on the controls) and pilot (who was clueless as to what his co-pilot was doing) were on that flight, basically flying the plane into the water – At 3,000 feet, the co-pilot mistakenly thought he had entered a stall condition and dived the plane down to do a stall recovery…. and smacked into the water. It was pure luck they didn’t crash into a densely populated area in Houston and kill more people.
Lower standards, to lower costs, I’ll bet they were hired on the cheap. Robots and drones would probably be better.
Who would care? More people will die from the flu every day than from a plane crash into a populated area.
The air delivery gadgets are amazing .. the logistic that will facilitate the implementation .. on mass .. of this trillion gadgets in the air at one time delivery system will be nothing short of a miracle.
Starship Robotics – Mobil Navigation – a 6 wheeled cooler that can deliver packages will revolutionise food & package deliveries.
It will give a new meaning to being mugged.
Quote of the day by Fed Evans: If Got 3% Inflation That Would Not Be So Bad
– Very Difficult To Imagine Out Of Control Inflation
Beware of Amazon daily pricing “inflation”. I bought a massage chair for $1,200 that is now priced $2,200, sold direct by Amazon.com. It dropped for a few days, and it was only the brown version on super-sale. I have literally saved thousands multiple items by just waiting for weird price drops of 30-50%, on items that are sold direct and shipped direct by Amazon (not third parties). I’ve been an Amazon customer from day one, yet now I basically feel it is like daytrading when trying to not get mentally screwed by daily price fluctuations. Either they manage inventory poorly, or they just want to create a game from having people check prices daily, etc? Weird way to run a biz, although when you don’t have to make a profit or pay biz taxes…the sky is the limit?
Amazon’s core is computing, so it is no shock that as they try to live up to/whittle down that goofy PE (by increasing E) they are going to use price optimizers to try and extract the maximum out of casual customers (those who don’t comparison shop).
The first easy give away that Amazon was morphing away from pure price competition…when they hiked used book fees so that the old $4 floor became something like $5.50 to $6.
Often, the lowest price products offered reflect the overhead structure of a company as a whole (ie, what becomes too cheap/marginally profitable to bother with).
So, when the general used book floor goes from $4 to $5.50…something is up.
Another dead giveaway?
That big red repeat buy button they offer.
It is hard to imagine a bigger give away that you don’t check/compare prices.
Ditto re ordering via Alexa. (“Alexa…please rip me off”)
(Amazon is actually getting to be an evil genius at scalping the less attentive)
And that annual/get ’em a little pregnant commitment fee for Prime “extras” has turned out to be a stroke of “bwaa HA HA” genius marketing slight of hand.
But people like saving money.
And they wise up.
And the internet makes both easier.
So we’ll see how high they can goose their margins before enough customers start Googling elsewhere.
Amazon may have scope and scale…but if it doesn’t have/employ price…then there are an ocean of competitive sharks on the internet.
As a matter of course these days I check various products on Amazon, and then when I decide what I want, I buy it off the original vendors site. Spread the love and reduce Bozos cash flow I say.
It is only when I need something urgently that I get it on prime for tomorrow’s delivery.
Amazon is playing used car-salesman games with customers. I can highly recommend the Keepa browser extension which gives you a historic price chart. Happy daytrading!
I imagine there are also browser add ins that will automatically run price comparisons against Amazon (the sort of thing they dread).
Heck, I worked for a company in 2001 that almost invested in a startup that made a browser add in that ran price comparisons (DeltaClick?)…so it is doable (I imagine that if you can scrape a Universal Pdt Code off Amazon…then it is off to the races).
Right now, my Microsoft Edge browser is automatically pulling up promo codes for every site I visit.
And sooner or later, MS, Google, etc. won’t be shy about playing hardball against Amazon.
So, while the huge logistics network is a thing…it is a hugely costly thing…and it may turn out to not be the key thing.
Yes. Sold & fulfilled by amazon has wild swings in price .3rd party seller can not afford such losses. What i want to buy I save in a list & check weekly or thro offer sites .I have bought Size 11 comfort sneakers in different colours ,business shoes in black/brown (step in or with lace) whenever the prize is 40% less than market prize. I have un opened shoes in box keeping for special occassions.Same story for business shirts full/half where the same is sold at 50% less than what i paid 2 weeks ago. so what to do average in & buy &store new shirts/boxers/ crewneck tshirts/trousers !
They are trying to screw 3rd party vendors–take it from an ex.
You’re Bezos’ ex wife?
Thanks to tax code companies grow assets earn no money ceo get fantastic pay workers 15$ a hour if lucky govt gets no tax revenue and you think the system won’t go broke
If the work is online , Tax code co’s can get it done at 5$/hour workers who speaks english(other than tech whom will cost $10) like legal/pharma /accounting/education /marketing assistants/secretarial/ researchers etc from India ) $5X8X25 days =$1000 (₹73000) is middle class income in India .! All S&P 500 co’s have office in India & employ thousands of workers other than via Big software offshore contractors like Infosys,Tech mahindra,TCS etc
I was in India back in 1995. It was 35 rupees to the dollar. We’re right behind you with the dollar devaluation and the amount of goods purchased.
Manufacturing in China has similar ratios. Auto workers make the equivalent of $5.75 an hour. This buys a solid upper blue collar lifestyle, equal to Detroit’s in it’s heyday. The workers have good pay, health insurance, a pension, paid sick days and holidays, good working conditions, and job security. How can Detroit compete against that?
So far, what is left of Detroit has other worries than China at least re: US imports.
Here are the top ten importers:
Japan: US$39.9 billion (22.2% of total US imported cars)
Mexico: $38.1 billion (21.2%)
Canada: $37.8 billion (21.1%)
Germany: $18.1 billion (10.1%)
South Korea: $16.3 billion (9.1%)
United Kingdom: $9.9 billion (5.5%)
Slovakia: $3.9 billion (2.2%)
Italy: $3.5 billion (1.9%)
Sweden: $2.3 billion (1.3%)
China: $1.8 billion (1.0%)
Of course the Canadian and most Brit are from branch plants of other countries but they have the jobs. In auto parts China is a growing player but far behind Mexico which has just passed Canada in parts. I think Mexico is one to keep an eye on for both other members of USMCA (Why not MUSC, which would be an easier acronym and reflect geography?) They have I believe a wage scale like China’s and their plants are right on the border
One of the benefits of having a closed capital account. China closed capital acount exports unemployment to the rest of the world.
As many writers have pointed out, our greedy self-centered politicians ‘bent the knee’ to China long ago. Allowing China into the WTO in 2001 was the beginning of the End for America. American’s as a whole don’t make much money anymore, so they need an endless stream of cheap stuff from China.
I clearly remember the pre-China/ pre Fed QE America and it was a much better place. Seems most people have forgotten.
It sounds great .. but .. isn’t there a loophole somewhere.
& to compete the currency need to be the same value across the board .. otherwise it is just one big rip off.
Detroit is being ripped off & India is too.
York …do really think you got such a great deal from Amazon, $1,200 for a massage chair instead of $2,200 list? Think again….it probably cost Amazon $500 or less or $750 at the most!
Spending $ to save $ is what American consumerism is all about!
With UPS not picking up packages from major retailers during Xmas, Amazon would be dumb not to expand its own shipping operations. They have proof they can’t rely on outside delivery companies during their most profitable season. This expansion only confirms, customers can rely on Amazon no matter what. BTW, I like Amazon but don’t buy much from them.
Amazon’s AWS division has been and continues to be extremely profitable .
In the past AMZN has not made money on their retail division. Is it now profitable ?
It reminds me of that scene in Ideocracy where the lawyer is proud to have attended COSCO University (he got into it only through connections).
Amazon just closed down their trial of getting into health care/insurance though.
Amazon, Berkshire + JP Morgan health care venture will be disbanded this month.
That’s a shame. We’ve spent decades dismantling our former public pathways to healthcare and replacing them with private for profit medicine, which is why we can’t even distribute a vaccine in a healthcare emergency (except the elites of course). Well run 3rd world nations can do better than us.
Almost all new drugs including these vaccines, are created with public tax dollars. But the companies won’t distribute unless their private methods allow them profits.
Hence the clusterf&ck we see in distribution. We’ve obliterate public health beginning with RR in 1980 with the push to for profit medicine.
Your remarks reflect your bias and not the facts on the ground.
Check Bloomberg’s vaccine tracker for the actual numbers please.
1/3 of all vaccine in the world has been given in the US to date. 5 million of the 15 million doses given worldwide.
On a per capita basis, Israel is number 1 by a huge margin, UAE and Bahrain next, UK barely ahead of the US (approved vaccine about a week earlier).
All the rest of the EU and Asia are far behind. As is Canada.
So despite the general media coverage of the US vaccination response, which has emphasized shortcomings in national coordination, we are ahead of all peer countries by a sizable margin with the exception of a few small we’ll run countries. And the UK. Just because we are substantially behind the stated goal doesn’t mean we are doing poorly, we are doing very wet, exceptionally well actually.
And if you look state by state, the vaccination campaign in the US on a per capita basis is doing best in VT, a small we’ll run blue state, and then in a bunch of red states like ND, SD, WV, and AK, followed by lots of the Midwest. The west coast is behind. In other words, this isn’t about politics primarily, it’s about states that are organized. I’m in CO and we are also doing better than average.
And it clearly has nothing to do with government run public health systems, as some of these, like in Israel, are doing well, but others, as in the EU, are not.
Sorry for typos, working overnight shift, tired…
Not to burst your bubble. “Federal officials said as recently as this month that their goal was to have 20 million people get their first shot by the end of this year. ”
That’s from a New York Times article in December. The benchmark was never other countries. We didn’t aspire to be slightly better than other countries. But it seems in terms of propaganda, we are.
Guess I’d better not say what I think about mRNA meds…or Fusion Proteins, for that matter……MAB madness. (no typo).
Read up on misfolded proteins and amyloidosis….relates toRR…
Further, the vaccine campaign in the US has been a massive undertaking led by health systems and largely coordinated by them, with county and state directions. My health system delivered more than 10K doses in Colorado with about a week in advance notice. This was coordinated by administration and required massive effort and depends on cooperation of staff and people who may not seek the vaccine for whatever reason.
A far larger problem will be variable acceptance of the vaccine in the larger population beyond health care workers and nursing home patients.
But most of the commentary I’ve read is the worst kind of politically motivated armchair quarterbacking. Most of the people making criticism have no idea how complicated a thing most states have done far better than Asia or the EU with the UK being the sole exception.
Here in Oregon vaccine delivery is a train wreck.
They have only been able to use 25% of the stock they have on hand. The state health authority is such a sluggard that they are just now convening a “vaccine priority advisory committee” which won’t be making its decisions till mid February. My wife was in the county emergency managers meeting with two folks from the county health department a couple of weeks ago. She offered up the two large state of the art ,ultra low temp freezers her agency has for water quality lab work . The two county health officials gave her a puzzled look and said,” why would we need those.”
My wife and I received the vaccine this morning along with hundreds of other citizens. There were two lines at the hospital, one for heath care workers, and one for citizens. We have three large hospitals handing out vaccine shots. We registered online Monday, picked a time slot, and went there this morning.
It was all very efficient and we were in and out with the shot and a time slot and date for the second one in 30 minutes. Plus,they had valet parking for those who needed it.
This was in The Woodlands, Texas.
Aircrafts today. Aircraft carriers tomorrow.
Whatever you want to say about Bezos, it is a certainty that he is willing to spare no expense to expand his empire, although it is not remotely surprising that he is doing it in a clever fashion here.
Next on deck, all of those 737 Max jets that are parked and have no customers. Perhaps there can be a use for them… or heck, perhaps the current US customers are desperate enough to try unloading those Maxes….
Then Amazon can claim to be even more environmentally conscious with fuel efficient jets.
I made a related comment when the 737 Max fiasco started.
Convert the 400 plus airframes to cargo, install three ejection seats, Capt., Copilot and dead header or check pilot. You end up with a high performance acft that requires a functional computer, or you exit the plane.
Just like the F117?, F35, or F16
I really do like your idea for not wasting all those un-airworthy airframes (no matter how many detectors and software workarounds they put in) , but am somewhat concerned where the aircraft winds up when the crew punches out.
Maybe add a delayed self destruct feature that blows the whole thing into small enough pieces that damage on the ground would be minimized?
Off topic: Don’t know if you’re still short WR but there is one heck of a read today over on ZH: “Investing Legend Goes Apocalyptic….by Jeremy Grantham.
Talks about how his clients began to hate bears and his bearish advice in 1999. Lost a lot of them, but he says it was worth it.
I read that article. Very well reasoned.. He has it right I believe. Don’t wait til the Fed or Wall Street tells you the top is in. They probably know we are close, but they can’t say it. And if you are an investor don’t be a fool and try to ride it all the way to the top. Get out and sit tight for years if necessary.
I think he has the psychology of the bubble correct, and in today’s relief rally the dollar is firm. Allies who were questioning our democracy yesterday are getting the green light. Yields are up and the banks are boffo!!! The big difference is that underlying structural problems (brokered election, terror attack, WAR!) which took place after 2000 are behind us (hopefully). The crashes of 2000 and 2008 did not need to happen. Even Tesla can survive in this environment. What should happen is not a crash but a reallocation.
What AMZ loses in profitability, it more than recovers in data. That data is their secret sauce to remaining innovative and fending off competitors. Ironically, many of the companies that compete against AMZ are proud AWS customers. Instacart, DoorDash, Ocado, the list goes on and on. You can lead a whore to water but you can’t make her think.
In theory/practice, Amazon can not peek into customers’ data. I mean Amazon can infer a company like Netflix is doing well because of the later’s increasing spend on AWS, but so what? That does not mean Amazon gets to peek at Netflix’s customers list. Also the data is mostly encrypted.
This is the same company that is under investigation for intentionally abusing reseller data on it’s retail platform to gain competitive advantages. Amazon studies which products are successful, and then recreates those products under the Amazon name at a discounted price, undercutting their reseller partners. If you don’t believe AMZ would tap into AWS data for a strategic advantage, you might be interested in several bridges I have for sale.
I don’t think you understand computing. Data encrypted with strong security is pretty much impossible to break.
What you are talking about does happen on the FBA platform. Users of that platform store their data within Amazon’s database unsegregated (this is key). Other companies like Netflix use AWS, but how data gets into their database within AWS is controlled by Netflix itself i.e. Netflix’s data is segregated from Amazon’s data.
Seattle Times says Amazon just eclipsed Boeing as Washington state’s largest employer. Prediction: Boeing’s “biggest building in the world by volume,” located near Seattle and which once cranked out 747s, 767s and 787s, will become the world’s biggest fulfillment center.
BA’s Auburn plant is 4.3m sq. ft.
787 program moving to So. Carolina.
777 demand facing headwinds.
767 in wind down.
747 is dead.
737 assembled in Renton. Finished in Wichita.
Perhaps BA’s mgmt will restart the 717 (carryover from Mac air) to counter Airbus A200
dominance of smaller aircraft [than A320 or 737 platforms] served markets. Program shutdown in ’06.
Given BA’s mgmt by Excell vision & execution….probably sell-off the commercial aircraft [accounts for 15% of revenue] and milk the military/satellite/data analytics contracts.
Wild times ahead, tighten your shoulder harness.
Would like to hear more about the 737 (where is Renton?) since it is the absolute backbone of many fleets…there are a *ton* of them around, counting all the various generations.
When times get bad, sometimes it makes sense to really, really stick to the meat and potatoes.
Not 100% sure if this applies to aircraft since new Gen engines tend to be markedly better…can the old 737 model bodies/control systems simply plug into later Gen engines?
Or is the rest of the plane basically built around the new Gen engines?
Don’t know a lot about this but the usual reason for new engines is fuel economy. At these low prices a lot of old planes may be viable.
MC 101 tell us!
Renton is south of Seattle.
You cannot just stick different engines on any aircraft. They have to be type certified through the entire process. Older AC are usually way past the end of useful life due to pressure cycles and metal fatigue. In other words, they are worn out. The desert has thousands of them parked, windows foiled over, no buyers, no options.
The new Gen 737 MAX engines were substantially larger diameter – larger compressor fans = greater thrust for less fuel.
The 737’s landing gear was too short to accomodate these engines, (unlike the Airbus 320Neo, which had longer landing gear to begin with and could do thes new Gen engine upgrades easily). This was the root cause of the 737 MAX’s problems.
In Boeing’s rush to build a quickie competitor against the more fuel efficient 320 Neo, they just shoved the large diameter new engines up higher into the wing pylons
…. which changed the aerodynamics and center of gravity of the 737, causing it to have a propensity to tip its nose upward on acceleration
…. the quickie fix for that was the ill-fated MCAS software which was supposed to sense when the nose started to tip upwards and would automatically push the nose down
…. the quickie cheaper way was to install ONLY ONE angle of attack sensor for the MCAS for the 737MAX’s poorer customers, like Lion Air and Ethiopian Air, instead of TWO AoA SENSORS with competent software to deal with conflicts in the sensors.
Oh, and Boeing didn’t bother to tell the 737 MAX pilots about the whole MCAS thing or train them for it …. They really should burn in hell for this …..
737MAX has two angle of attack sensors.
However, MCAS only takes input from 1 AoA sensor at a time
After reading all this plus comments, I’ve decided I like South Park’s version of this better than Kurt Vonnegut’s “Player Piano” or Wolf Street’s. But then they had the advantage of not having to do it all with words, and the comments aren’t over yet.
Actually, if I look at Amazon as Bezos setting up the distribution structure for the coming Green New Industry, it’s a pretty good one.
A big part of Amazon’s success is not the industries it chooses, its the culture. They challenge the heck out of people, and its a high stress competitive environment, especially at the headquarters in Seattle.
When Amazon says it is going to do something, it gets done, even if they have to break some backs.
For some reason, it works. There is lots of turnover, meaning lots of advancement for those who stick with it. The rising stock price certainly is an important part of the employment equation.
Amazon, Berkshire + JP Morgan health care venture will be disbanded this month.
Amazon does not always succeed in everything.
I’m glad you mentioned breaking backs. That’s literally what’s happening amongst Amazon workers. Have you read Amazon’s very own leaked internal reports on safety? Oh….and a big part of Amazon success is being above the law and excempt from anti trust.
Gee Bobber, your comment reminded me of an old friend of mine. His wife ‘stuck’ with WalMart and was management. (It was still WalMart). She finally quit when they moved.
I bought some auto paint sealant/protectant online the other day. I was given two options to pay: PayPal, my usual goto, or ‘Amazon Pay,’ which I hadn’t heard of. I tried to pay with PP, but the transaction was rejected (probably a coding issue, second time that’s happened to me), but the Amazon Pay transaction was seamless (I’m not a Prime prisoner). PayPal better watch its back.
“Open the pod bay doors, Alexa.”
‘Dave, I know I’ve made some mistakes but I can get better’
I have the greatest enthusiasm for the mission and I enjoy working with people.
Why do you stay in the box, Josh?
Amazon’s will face it’s Eventual Waterloo for the same reason all empires do. They will become too complex and cumbersome and the rising costs of this complexity will drag them down. They don’t have the advantage that Standard Oil or Apple had with enormous margins. Amazon is a patchwork of marginally profitable business’s fueled by a crazy stock market and easy money. When the tide goes out and you have to eat what you kill they will be nibbled away by Jackals on all sides.
Amazon Web Services is quite profitable, with 25% operating margin, but yeah the rest ….. not so much.
I also predict that once the country “collapses”, Amazon’s FBA might go to hell i.e. fraudulent behaviors will skyrocket, overwhelming their Trust and Safety teams. Heck probably the same issue will happen with a lot of other e-commerce companies.
A recent personal experience. A buyer on eBay recently made a fraudulent claim against me saying that I had sold him a defective product. I mean an item is either broken or not, but instead asking for a return, he instead proposed a settlement. Proposing a settlement is actually a seller’s prerogative, … LOL, after all I was the one “in the wrong” right? Buyer was basically counting on eBay’s policy of always siding with Buyers to get a discount, and voila that’s the “advice” I got from eBay’s Trust and Safety team. I obviously had no choice but to go with this “settlement”.
Buyer’s rating? 100%. If these kinds of fraudulent behavior is happening during the good times with people with perfect rating, one can imagine what will happen during a REALLY BAD TIME.
People have forgotten that trust is the foundation of all commerce.
The fact you can “choose” to rate a buyer as long as you “choose” it’s a positive rating and you agree you can never “choose” any other “choice.” Thanks George Orwell Ebay. Such a choice of choosing.
My position is if I have to buy it from Amazon I’ll do without. They’re evil I hates them forever
I’m not a fan either. Maybe a purchase a year. I just don’t need stuff and if I do, there are cheaper and better options.
On a wholly unrelated note…how about a 2020 in review post about your site stats (pages viewed, uniques, ten most popular posts, etc).
People (well, me) like to think they are participating in something big(gish).
I like “big(gish).” I covered some of your questions in mid-November, including:
“But 2020 was special. Traffic in the 10 months so far jumped by 30% year-over-year to 1.3 million pageviews per month on average (over 13 million pageviews in total). I spend zero money on advertising the site. Growth is all organic. So this 30% increase in traffic is great. Thank you, Dear Readers!”
Yes, 2020 was a record year. Here are the top 5 articles in 2020:
176,537 pageviews: https://wolfstreet.com/2020/04/12/going-to-be-tougher-for-lots-of-people-to-even-get-a-mortgage/
112,815 pageviews: https://wolfstreet.com/2020/06/19/i-who-hates-shorting-just-shorted-the-entire-stock-market-heres-why/ This one had 429 comments, a record.
88,201 pageviews: https://wolfstreet.com/2020/03/11/boeing-crashes-as-43-billion-in-past-share-buybacks-turn-into-existential-threat/
79,210 pageviews: https://wolfstreet.com/2020/06/27/world-trade-plunges-heres-why-its-even-worse-chinas-deep-fake-data-comes-to-light/
78,836 pageviews: https://wolfstreet.com/2020/07/14/it-starts-mortgage-delinquencies-suddenly-soar-at-record-pace/
This is just among friends. I don’t like to publish articles with just this kind of stuff in it, for a number of reasons.
Question: I regularly click on ads just for the hell of it and to help out, but does it make any significant difference to your ad income if I actually spend some time there and/or take it all the way to where they want info from me? Have to draw the line there.
I missed this article (doing some bio research reading), but a check’s in the mail tomorrow.
Don’t stop swimming in the Bay or some equivalent, or wreck your health doing this website, that is number one!
Thank you for the check!! And I had a gorgeous sunset swim in the Bay today. Water was 52 degrees, and since our swim club is closed, there is no sauna afterwards, so I run up Russian Hill a couple of times to warm up. Great break from the website and to clear my mind.
If you see a product in the ads you’re interested in, by all means click on it and check it out. But please do NOT click “to help out.” Google is ruthless in punishing me for those clicks. Google deducts tons of money every month from my income because of “invalid clicks” — clearly to fatten its bottom line. But I cannot get around Google. Google needs to be broken up.
Got it. All I have to do is wander around the website a bit, which is what I usually do….some tech stuff follows me here. Sometimes I’m only “negatively” interested and just doing “research” on what I think is BS…….but you are cool as long as I spend a couple minutes there, correct?
Yes. But not 10 times a day :-]
Democrats will control the Senate. Add in Yellen (7 million dollars received over the last two years from speaking fees), and we are set to have the best Government the banking/tech cartel can buy.
UBI/MMT coming guys. Better load up on that Amazon stock.
I don’t think I have bought one thing on Amazon, but I know a lot of people do. Doesn’t anyone feel like they are drowning in stuff. I am in the middle of an early spring cleaning and purge this week. I value function, not fashion. I get too much stuff because friends have too much stuff that is functional but they are tired of the style, especially furniture and winter clothing.
Consider reading the book I just found at the finally minimally opened local library, ”Longing for Less” os.
Has a good idea of what is driving the new minimalism policies and practices that many of us older folks, especially we ”pre boomers” are becoming more and more comfortable with.
Some of us even have the idea of foregoing all kinds of medical services except pain relief, instead of living from appointment and waiting room to the next of each. After watching my fil during his extended senescence, I am rapidly embracing that concept, as did Barbara Bush IIRC.
Maybe some on here have more personal experience with these concepts and can spur Wolf into his usual excellent analyses??
Wolf may already have done an article on the Great Scam known as the Medical/Big Pharma/Insurance Cartel.
Their medical procedure and drug price monopolies amount to organized racketeering.
Medical doctors are not trained to treat root causes (lifestyle and environment) of chronic diseases– instead they ‘manage’ patient illnesses (drugs, surgery, and regular doctor visits) over the long haul. Since they are addressing symptoms and not causes they essentially view patients as dependable cash cows.
Your best best bet to dodge bullet in a cartel-controlled ‘health care’ system is to self-insure yourself (save money for contingencies to pay cash in case you do need medical care) and live the cleanest, healthiest, and most stress-free lifestyle possible.
For the vast majority of Americans though that is too much trouble and takes a little discipline.
They unwittingly are indulging in sick lifestyles and will pay the consequences as time passes. And the beat goes on.
Good points H, but ya better have a ton of cash if you are going to pay cash for medical services…
Friend had a very low blood pressure event, went six blocks to hospital, was there overnight, and the bill was $88,000.00; her hubby had them on couple of medicare supplemental insurances that paid all but $18.00, but you get the idea.
IIRC, there used to be some very high deductible medical services catastrophe insurances available at reasonable cost, otherwise it’s risky to go without any coverage, unless you are without any assets/net worth and can just go the BK route.
I had a very bad auto accident event as passanger, and although not my fault at all, it took 4 years for the insurance cos to settle and pay off, and meanwhile my credit went to heck in more or less a straight line and stayed there for wayyyyy too long. Ironically, I had just let my Blue Cross/Shield lapse cause I was broke,,, and so it goes.
Stress alone causes more health problems than most people think. I can make you overeat or take drugs and REALLY trashes the immune system.
Unfortunately this “culture/society” we are stuck in is almost based (parts are even designed to) on causing stress.
Shipping is how Amazon takes growing control of retail, B+M, and online. It’s expensive to ship from a small business website.
The only problem is now, fewer are making money even if they do have jobs. But looks like the new Congress will stim the economy much to Amazon’s (and China’s) delight as long as they can.
Race to zero: 0% Fixed Loans for 20 Years Appear in Denmark – Bloomberg
Wonder what’s going to happen after that? Seems like you have dug the hole you can’t get out of.
0% mortgages have cropped up in Denmark years ago. Last year, a Danish bank began offering 10-year mortgages with negative rates. But they’re not free. There are big fees associated with them. So instead of interest, you’re paying a fee.
Mirroring creative accounting in the auto & entertainment (Hollyweird) industry, there’s always “front & backend” fees that are the smallest of print.
Just another iteration of a “monkey trap” for humans.
I honesty hate name changes like going from Packing warehouses to Fulfillment center. Even if you paint it blue it still smells the same.
That being said, will the USA anti monopoly laws affect Amazon?
One problem is states may impose import regulations on products due to ESG concerns. Not hard to imagine state bans on products, especially Chinese manufactured food products. The other thing is the carbon footprint of these aircraft, and the no fossil fuel agenda. Not all roses from South America shipped overnight.
The USA does care about stuff like that.
The only reason coal is almost dead is costs not because it polutes more.
Things may change or not with the new USA President but who knows?
It’s strange that Amazon is buying used planes, what’s with that?
When they put ion distribution centers, they rarely take over an old shopping mall, they start fresh and don’t waste time converting and repurposing, demolishing and going through challenging permitting that wastes time — so, why waste time converting planes?
If I were a shareholder I’d wonder why …
Probably fastest, idk what lines are like for new planes but it does take a while to build one of those behemoths.
The reason Amazon is buying used planes to convert is that is the way most cargo aircraft are created. A commercial airframe is only certified for a certain number of hours for passenger travel before it becomes very expensive to maintain to FAA certification. The requirements on the airframe for freight use is much less stringent. In most cases planes are sold to be converted to freighters at that point and spend the second half of their life in freight service. There are large companies that spend millions of dollars to create a conversion process for a given airframe ( in this case the 767) that can be certified by the FAA. Once this certification is achieved, the conversion is an assembly line process, and is nothing like converting a shopping mall to a shipping warehouse. In many cases the aircraft maker did not even have a FAA certified freighter available to purchase new in a given plane size. The 767 is a wide body plane that is mostly out of production at Boeing. To get a new widebody freighter made would be much more expensive and potentially take longer ( if Boeing even has a suitable one in their stable).
a)availability and b)price of used aircraft are in AMZN energy(s) alignment.
The airframe lessor will gladly accept any offer to activate an inactive aircraft back in service. Some revenue stream better than none.
Same with the engine lessor (as the two are completely different entities in the commercial aviation world).
Passenger to freighter conversion is non issue as STC’s (supplemental type certificates from aircraft mfg/approved by FAA) for cargo door modification. BA/Airbus platforms are designed for either operation.
Australia, Spain, UK, and the US (AZ, CA, NM) have massive storage/boneyard facilities where you pick any aircraft (xcept military birds), promise to pay and it’s yours.
Note: accelerated depreciation metrics. Every ten years any aircraft is in service, its operations costs goes 2x the following decade. Onwards ’till the hull value is null and any valuable components (avionics/consumables/engines) are harvested for reuse.
Air freight biz runs on razor thin margins.
Amazon EV delivery vans coming soon, 100k for now. I wouldn’t be surprised if Amazon had the largest warehouse footprint of any company in the world. If they aren’t already, they will also be the largest delivery service. Is there free-ish and sort-of fair competition in all the spaces that they play in? Probably. They employ 810k people in the US, so about the same size as the post office. There won’t be appetite on either side of the aisle to break them up, but, the free shipping portion that appeals most to consumers might come under tax scrutiny. The sales tax structure has already changed to be based on locality, wouldn’t be surprised if a form of delivery tax came into play to make up revenues lost from gas taxes coming up short.