War Among the Business Models: It has been just short of a year since our June 11, 2016 report on the www.peoplenomics.com website titled “Bezos and Bentonville: Barbarians at the Mall” but the battle is raging in background and actually explains a lot of today’s headlines.
One of our core axioms is that “Everything’s a business model” and the battle over how Americans shop will determine (in large measure) our nation’s economic future.
The story is not there every day. It’s not like the Trump-bashing malarkey or the “Comey mislead (or didn’t) this way, or that…” or even Hillary’s failure to accept loss because people didn’t like her as much as Trump.
The warring business models story is almost ghost-like. Shows up only now and then, but it’s likely THE story of the decade. Like “radio” was going into the previous Great Depression.
The coverage of it in the L.A. Times this morning posits that up to 25% of U.S. shopping malls could close in the next five years.
The story is great, but it doesn’t delve deeply enough into the real battle between the (so-called) two party system’s owners.
I refer to The Factions. In this instance it’s the high tech e-tailers (*like Amazon which has the largest market share) on the one hand and the Real Estate Moguls who have traditionally sold mall ownership fractions to long-term HUGE investors. Think pension funds, life insurance companies, and so forth.
The business model question really comes down to this: Suppose you owned a MASSively big Mutual Insurance Company and you were on the portfolio committee issuing guidance.
There, you might have an incredibly difficult decision to make because there are two “shopping models” you could invest in with the goal of having the highest rate of return over the next 10, 20, or even 30+ years.
One of the models is backed by convention and the new generation of real estate moguls, one of which is the President. Whether you’re talking the mega Malls, or simply high-end mixed use commercial (at the street levels) with mixed residential upstairs, putting money into buildings has always made sense.
The other “shopping model” to consider now is what Jeff Bezos has done with Amazon: In some test markets they are already delivering a core list of about 1,000 products in 2-hours, or less. They own the world’s largest producer of inventory-picking robotics. And while the public has been snoozing through this high-end tactical business model war, Amazon is (check me on this) the fourth-largest air cargo operator in the world. (They may be up to #3 now…)
Sitting on the MASSively big Mutual Insurance company policy board is NOT a job you want.
The President has already hinted that he sees an anti-trust issue because Amazon has become so damn successful.
What’s more, when you pick up a paper today and read about how “300 teens brawled on the Jersey shore) this weekend, you wonder if Social Media is more than a technology. Could it be the emergence of a Digital Mob that is taking over America?
This will not stop being a cornerstone investment problem any time soon. Jeff Bezos has already purchased the Washington Post and we privately wonder whether the paper’s anti-Trump stance has something to do with reminding the Real Estate Developer in Chief that drones, 2-hour delivery, and happy Prime customers (like me) are voting every day with their wallet…
This is the war. This will ripple out onto the workforce, particularly in “hot cities” of the West Coast. Seattle, the South Bay…oh yeah…hot spots of the still-unfolding software revolution.
Back at the investment policy committee level that banks, pension funds, and insurance companies use to grow capital over time, it’s not clear what the outcome will be.
Clearly, former president Obama (who is just closing on that $8.1-million home in DC) is on the side of the Digital Mob. Saul Alinsky would have it no other way. A mob is a useful tool, especially with the right leak sources and a supportive Big Paper. Besides, as the NY Times reports, the Obama digs are just miles from the White House. We would expect nothing less from his revolutionary “government in exile.”
But even with the Mob, there aren’t enough software jobs down the road. Once the electronic infrastructure is built-out and once the stock-picking robots are deployed (and self-maintaining & repairing) what then will be the basis of income?
Sure, we have seen liberal blatherspeak about some kind of guaranteed National Income floor. The latest to spew forth was Mark Suckerberg who, while advocating for the digital mob, failed to explain who covers the account balances.
Or, with all his wealth, is there a secret potion? A way to continuously make-up money on-the-fly? Like the Fed doesn’t have that nailed?
A middle-ground investment would lay the big money on Wal-Mart. Well managed, Wal-Mart has one foot in each camp: They have a great online presence (which is where the Uretopia Ranch collection of 55″ UIHD monitors came from at $321 a what delivered). But more important than the online “face” Wal-Mart has a real estate presence and if a return is needed, there’s no trip to the Post Office or UPS and then waiting until the product is logged back in. With Wal-Mart the online merchandise fails are store-returnable.
The investment policy questions are many and diverse. And for the true conspiracy theorist, would the reason the U.S. has not MOAB’ed North Korea because we ARE waiting for them to develop their program further? In Peoplenomics Wednesday it was no accident that we reviewed fallout plume dispersals for the Seattle and South Bay areas.
For now, the Peoplenomics subscribers are starting to look past the (likely) summer peak of the markets at new all-time highs in the mid July to September window. We’re shopping put option spreads out in the December-January period.
Although we would never wish to be on an investment policy committee where billions are deployed, as small, light, nimble players, there’s no point in missing a chance to “buy low” for the likely downside action to follow.
Seattle is looking at up to a million new residents in the next five years. And the San Francisco area, already stuffed is likely to be a Fullerto(w)n, if you’ll forgive the feeble attempt at NorCal humor.
Too early to predict how it will end, but like a good movie, this beginning is really a grabber.
Jobs Victims to the Factions
As the war between these factions continues, we have two preliminary job figures ahead of the federal data due tomorrow.
Let’s start out with the bad one:
The press release is similarly grim:
“The number of workforce reductions announced by US-based employers rose sharply in May, as planned job cuts totaled 51,692 for the month. Nearly 40 percent of those job cuts were announced by Ford Motor Company, according to the report released Thursday from global outplacement consultancy Challenger, Gray & Christmas, Inc.
May job cuts were 41 percent higher than the 36,602 job cuts announced in April, and 71 percent higher than the same month last year, when employers shed 30,157 jobs.
Employers have announced a total of 214,495 job cuts so far this year. That is down 28 percent from the 275,218 job cuts that occurred last year through May 2016.”
Does take a bit of wind out of the Great Again sails, as we read it.
The other side of the equation is job creation and for that number with have today’s ADP data:
“ROSELAND, N.J. – June 1, 2017 – Private sector employment increased by 253,000 jobs from April to May according to the May ADP National Employment Report®. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. “
This may be seen as partially offsetting of the higher Challenger job cuts. Now let’s zoom-in on where the growth was:
What this seems to picture is OK growth in Construction but the real action has been in services under the “business and professional services” category which is (we suppose) app builders and people running implementations to get every company in the world on some kind of in-house ERP program.
Market Futures? Oh, you would ask that. Flat and working toward a level opening.
Tomorrow’s federal job data and some trade information should clarify.
With the global markets firming a good bit overnight, I may have to wade back in on the long side on any weakness today or tomorrow. But we shall wait and see how it rolls.
What to Do on Climate
It will likely be announced today at the White House, but we see a lot of media jumping on the “climate change is real” bandwagon and their coverage is less than even in some cases.
One of the best reads was Reuters which plays it down the middle.
More supportive of keeping the deal was The Atlantic which offers that most Americans want it.
Factional play? Why ‘shore….
Bezos Washington Post sounds a little more worked-up with “Don’t compare Trump’s Paris decision to Nicaragua’s; they’ve embraced renewable energy…”
Huh? WTF? Don’t these people read? Believe NUMBERS?
Don’t look now, but should the
Bezos Washington Post have looked, they might have found World Bank Data that says Nicaragua imports on the order of 40.858% of its energy (2014) while the U.S. imports just over 7% of our net energy (2015 data here).
Somehow, we think this all gets back to the ongoing e-tail attack longer term on shopping centers.
After that will come the liberal-inspired end of personal travel autonomy (with cars) and the arrival of self-driving vehicles with is all part and parcel of the plan to keep people from moving freely (or cheaply) around the country.
Gotta save the environment, right? What better way to do it than corral the civpop?
Oh, and on point: US Army to test self–driving trucks in Michigan.
More tomorrow… I have to figure out what a self-driving car s/w update will cost. Will that be on disk, or downloaded?