Dear Mr. President (and everyone else) Go **** Yourself
The Market Ticker - Commentary on The Capital Markets
2017-10-27 11:16 by Karl Denninger
in Small Business , 382 references Ignore this thread
Dear Mr. President (and everyone else) Go **** Yourself
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Go read this article folks.

Now let this sink in: Everyone says that entrepreneurship is how the economy grows, right?

Grows for real, that is.

In order for someone to have a reason to engage in an entrepreneurial pursuit they have to have some sort of way to compete with those already in the market, whatever that may be.  At the end of the day everything, more or less, comes down to price.

When I started MCSNet in the 1990s in Chicago we were literally the second company (by one day at that) selling consumer internet access.

A couple of years later there were one hundred competitors in our local market.

Needless to say the only way to keep your head above water to find ways to do more with less.  Well, the only honest way.

We had no debt or Wall Street financing.  We also never turned a negative number on the bottom line, nor did we have any way to cross-subsidize one thing with another.  Either the products and services we sold made a profit all-in or we were crazy to keep doing whatever that particular thing was.

Today, on the other hand, the argument made for "entrepreneurship" is for me to come into a market and sell a good or service against a competitor that is running a negative twenty percent margin on the sale of everything they merchandise, and that's before their marketing and SG&A expenses!

In other words just on the direct cost of their goods they sell plus their fulfillment (getting the goods to you) cost their gross margin on those sales of goods is negative 20%.

That in turn means I can't beat them on SG&A and win, I can't beat them on marketing effectiveness and win, and since they're larger than I am the odds of me being able to beat them on COGS is an effective zero since Robinson-Patman says that said supplier(s) can't discriminate between customers buying like kind and quantity with a goal or effect of decreasing competition as a supplier if the product travels in interstate commerce.

The fact is that anyone who tries to "compete" with such a merchant is simply going to take a large amount of money and turn it into a much smaller amount of money and the longer they do it the more they lose.

This is the "secret" of Amazon in the retail space and what's happening to everyone else -- they intentionally sell at a loss to destroy competitors and in fact they are doing so at an ever-increasing percentage of loss in order to drive even more people out of business.  They're not beating everyone else by being "more competitive", by having "better marketing" or anything of the sort -- they're simply selling at an intentional and ever-increasing (both gross and on a percentage terms) loss.

This is not "loss leader" pricing or a temporary thing to clear inventory on some set of products that are obsolete it is across the board and has been going on at an accelerating rate for over a decade.

That sort of activity should not be tolerated by either Wall Street or regulators, but it is -- and in fact it's cheered on by both, including some 60-odd cities now trying to institutionalize screwing every other retail business by getting the firm's "second" headquarters building!

I will tell you this, right up front:

There is no ****ing way anyone with more than a IQ of 60 would contemplate entering an entrepreneurial endeavor where their much-larger potential competitor has been running accelerating negative gross margins for ten years and yet not one single thing has been done to declare such activity an unlawful and unfair competitive practice and even worse it is being supported by outright LIES both of commission and omission from Wall Street investment houses, while the President of the United States cheers on the scam and destruction of entrepreneurs because it makes the "stock market" go up.

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User Info Dear Mr. President (and everyone else) Go **** Yourself in forum [Market-Ticker]
Posts: 7869
Incept: 2007-09-10

Scottsdale, AZ
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I am one of those folks that has to compete with Amazon on any product sold by a distributor. It's not just Amazon selling direct from their warehouses that kill the little guy, but the Indian and Chinese vendors that will work for pennies just to get a sale. Many manufacturers try to MAP price their goods to make sure that there isn't any undue competition that may destroy the products value. An example would be the Taser Pulse that is MAP priced at $399.95 and currently listed on Amazon for $314.95. This same seller has it listed 3 other times under different UPC codes for different prices. After fees and shipping, this store is making maybe $5.00 for this sale. I am seeing this happen all over the net with both Ebay and Amazon. Product value is being destroyed by these stores and the manufacturers have given up on protecting their smaller dealers. This will effectively put most vendors out of business because they can't make enough to cover their costs. Amazon is selling stuff on Ebay and competing directly with small dealers there. The blood letting is only getting worse as both Fedex and UPS are raising rates again.
Watching the retail stocks getting smoked again today tells the real truth.
Posts: 7869
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Scottsdale, AZ
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Another issue that will also hurt Amazon...........
Posts: 19
Incept: 2015-12-15

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KD - you hit the mail on the head with the question of why is Wall Street perpetuating this?

I am a fairly active trader and have bought and sold (short) many questionable tickers, but I WILL NOT drink the cool aid with AMZN. It seems that the analyst community it fascinated with their scale and their ability to drive operating cash flow through a pay-when-paid extortion mechanism. The scale is only there because they are literally giving it away, as you point out. The positive "operating" cash flow is a farce and, while a solid cash flow strategy, it is not a strategy toward profitability. Well-run general contractors do this every day. Stay ahead on billings and stretch the trade as much as possible, while maintaining solid relationships. It's nothing new, and it's certainly not profit.

One day there will be a reckoning. It's a wild guess as to when. Maybe Bozos' strategy is to become too big to fail. Drive everyone out of business and get America so dependent on your business that there is no alternative. This is course, is subject to your second point of legality.

I can rant for hours about this "company"........
Posts: 19
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Aztrader - yes! Bozos drives a lot of this leverage as well. Just save your credit card information in the amazon app and make purchases with a tap of a finger, buying useless **** you never needed in the first place.
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As I see it, they can sell at a loss for as long as their stock keeps rising. As soon as the market calls bull****, they vaporize. Here's hoping Bezzle goes up in flames with his company.

(I thought that there were some IRS rules about a business having to make profit for 3 of the last 5 years or it is just a hobby. I guess that doesn't apply to corporations.)

Village Idiot
Posts: 165
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when asked about being in the casino business years ago from a perspective of it being a somewhat immoral way to make money our current president replied that Wall Street is a big casino. this logic of his i seem to recall also being in one of his books.

we have gone through a few cycles of rules not applying to see that a few variables are constant. everyone likes the way that the system works or at least the important people, the public will not demand any consequences and perhaps the public does not understand or have the capacity to understand what the problem is.

something else comes to mind. perhaps the president thinks that he can engineer a type of soft landing and unwind things. we here know that this would be illogical. however, when people that know me ask for an explanation as to what is wrong with the system, the consequences and how to fix it; all of us here know that it would involve some pain. no one likes this last part.

truly now i am coming to the belief that certain things are being propped up to allow the generation with the most messed up finances in history to age out. probably why we would not let the housing market crash out and have price discovery on basic underwriting principles. this is one of the last stores of wealth for the newly retired. same with cities with pensions. i would wager that you will not see the protected stuff where some wealth is stored for this group fail until they are as a group rather infirm and not a political force. probably the same with medical costs. everyone is afraid to pull the plug, pardon the pun. i hate to go conspiratorial but it seems probable and my generation has always been primed and constantly told how we will not have it as good, a constant subliminal message internalized.

the boomers are not evil, just a concentrated mass that has certain economic and social trends attached to it. the mistake was that they were easy money for the merchant class that simply had to follow the group demand through its history. it basically locked their needs into the needs of the country and they were easily manipulated due to the earliest forms of viral marketing. the subsequent generations are less concentrated age wise so there is the opportunity to not be forced to follow group think in the future.

quite a mess we made for ourselves.

There are two ways to be rich: One is by acquiring much, and the other is by desiring little.
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Just read last week's Economist. They are calling bull**** on Netflix, Uber, Tesla. They were nice to Amazon. A couple of weeks ago, they sort-of called bubble on everything.

They are not Zero Hedge; something wicked this way comes.
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A True American Patriot!
San Antonio de Bexar de runover with illegals, Texas
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One reason .gov is allowing this is to mask the true cost of things from the consumer. So Amazon is losing 20% on everything they sell. Can you imagine what people would do if prices were 25% higher just to put 5 points to the bottom line? It would obliterate the bottom 80% of consumers. Now the other side of the coin is that at some point entrepreneurs would start new businesses which would start hiring and paying rent on otherwise vacant buildings. But that would be many years after the greatest depression ever. OBTW, that's going to happen anyway because of the math.


Democracy is a conversation between 2 wolves & a sheep discussing what's for dinner. A Constitutional Republic is found when the sheep pulls out a gun & makes clear that his 2nd Amendment Right will be exercised should the wolves attempt to hold such a "vote."-KD 9-29-15
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waaaaay up North
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OR, it would maybe (long shot, likely) get people to start living more simply, doing without, within their means? Ok.....I must be nostalgic.

"If might is right, then love has no place in the world. It may be so, it may be so. But I don't have the strength to live in a world like that..."-Father Gabriel, 'The Mission'

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That isn't going to happen. Today they are in long lines to get their hands on a $1,000 I-Phoney. I like my flip phone which cost me about $10 and $14/month for unlimited calling.

IT'S THE SPENDING STUPID The US must become less a government of men, and more a government of LAW.When people lose everything and have nothing left to lose they lose it -Gerald Celente
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