The Curious Case In Amazon’s “Thanks, But No Thanks” HQ Reversal

Some laughed, some cried. Some jeered, some cheered, while others felt the ending left everyone perplexed.

As much as it fits the bill, this is not a theater review for some play running in New York. No, what the above aptly describes is the reaction of the now defunct Amazon™ headquarters that was going to be built in Queens.

And just like anything in New York the critics are out in full force with not a one seemingly on the same page. So much so it would be fair to say even the critics are criticizing the critics.

Remember when Sinatra belted out “If I can make it there…” and people across the fruited plain dreamed weary eyed?

Today, not so much. And with Mr. Bezos abrupt reversal of making it his #2 HQ shows, maybe, making it there isn’t as important as it once was. After-all, lest we forget, the original plans were for one #2 location.

Amazon changed that in the end to also include Virginia. So much for the all importance of NY in the eyes of Amazon right from the get-go. It seems far too many (like the politicians et al.) forgot that little wrinkle. In other words, #2 was really more like #2-of-2, which further proved the dilution of the once foregone conclusions of the NY imperative.

However, as I’ve stated on my show over the recent months, Amazon’s reversal is not as much of a head-scratcher when viewed via the current status of the financial markets. e.g., Amazon’s share value and subsequent market cap from September thru December ($2050 to $1307) equaling a $734 loss in a near straight line.

And as much as everyone is screaming about BTFD’s (buying the f’n dips) in the broad indexes. Amazon as of this writing has far from recovered. As a matter of fact is still down from those highs nearly $400, which brings me back to my point.

There was a time not that long ago (like say, in September) that if Mr. Bezos mentioned any (any!) sort of expansion in regards to Amazon the stock value rocketing higher.

Today? The once all important driver of the indexes (remember FAANG?) is not even keeping up with them. Something is clearly amiss and I am of the belief that Jeff (I use the familiar only for ease) himself is acutely aware of this, and this is the true reasoning behind the abrupt 180º escape from NY.

For Amazon to follow through on its plans there had to be two things at play. The first: extract enormous beneficial concessions to make the plan viable because the operating margins are near minuscule to start with.

And second: only if the share price remains impervious to those margins can it remain feasible. Hint: Amazon’s shares are still down nearly $400 from only months ago, suggesting, the term “impervious” no longer applies.

This is the reason, I believe, for why the shovel never reached the ground. In other words, when it comes to all the reasoning given such as protests, ill-will from politicians and more. I am of the contention these were the convenient vehicles for excuses in reasoning, not the true underlying cause. And if I’m correct the implications go far wider than just this latest corporate/political name calling. i.e., it’s bigger than just NY.

One of the underpinnings as to why this latest deal, then no deal needs to be appreciated is that when it comes to both the company Amazon and it’s founder Jeff Bezos, there is one thing which is undeniable:

When the entirety of the capital markets was on its knees (circa 2008/09) and the share value of even the most stalwart of corporate representatives were being slashed in ways that would make the Grim Reaper envious. Once The Federal Reserve under Mr. Bernanke’s tutelage fired up the printing presses under its many iterations now known as QE (quantitative easing) Amazon led by Mr. Bezos became acutely aware that business fundamentals were no longer relevant (such as making a profit) and narrative (i.e., what I call “future hype”) was now the business model of the day.

And it was in that moment that Mr. Bezos took this new paradigm and ran with it far faster and far greater than anyone else, emphasis on anyone.

For those that may forget, Amazon in 2008 was dangerously dancing between the $30 and $40 range and there were many (which I was one) that thought that based on even this low value it was overpriced. The reasoning? They barely, if at all, made any profit. i.e., the business model was unsustainable and was only a matter of time till this retail experiment failed. That is – until QE.

That’s when the paradigm began morphing from: how much can you make? To: how much you can lose while promising you’ll make it up sometime in the future? And even doing that eventually became a misnomer. See Snapchat’s™ IPO filing for proof of concept.

During this initial period I believe Jeff either understood this new paradigm or, was just the initial recipient and put what we all call “2+2” together on the fly. For with every subsequent earnings call from late 2009 through 2010 and beyond, the more Amazon promised – regardless of the costs – the more Amazon-the-stock was rewarded.

And if Wall Street was going to reward Amazon for forsaking profits at the expense of growth and narrative? Then he was going to give them a run for their money – literally. For he would spend to grow and propel a narrative so large it would culminate in him becoming the richest man in the world.

Then: QT happened (quantitative tightening) and with it, so too the bid of Amazon’s shares at any price, for so far – they aren’t being bought at even the same rate as the indexes it once nearly propelled on its own.

And here’s where the rubber-hits-the-road in my estimation…

For if Mr. Bezos concluded rightly (which I’m in that camp) then subsequently ran with the implications resulting from QE as a business structure. i.e., if they’re gonna reward me to spend, them I’m gonna spend till their wallets run dry.

One must also need to hold the same observation (which again, I do) that if he was smart enough to understand the implications on the way up, he should be just as smart to recognize its implications should it be turned off. And it is here where the true “why” resides and where I believe NY became a no-go. Or said differently: He (Jeff) knows precisely that.

Here is where I’ll also contend that any “luck” moniker he may have acquired by those in the business community as a result from QE gets brushed aside as proving any “luck” aspect has been replaced by shrewd, tactfully calculated business brilliance, with the fortitude to change direction mid-stride, regardless of the cat-calls and more of others.

To bolster this point he is now doing similar in his home base of Seattle creating the gnashing-of-teeth now from the Atlantic to Pacific. Many are pontificating that this is in direct opposition to calls from unions, politicians and more about wages, taxes, etc.

Again, all valid assumptions, however, I feel they are just the vehicle of the moment to build the narrative for excuse.

Using the current political situation and uproar against corporate entities along with any CEO wealth bashing thrown in for good measure Bezos understands the power in using narrative running probably better than any other CEO currently. (To reiterate, this is all my conjecture.)

I also believe he is tuned-in far more intuitively to the resulting success in his share value as importantly as to where that came form, along with the implications if it is no longer going to be the force to front-run against – than front-running (or retreating) in the opposite direction makes absolute perfect business sense. Hence the sudden multiple about-face on grand scales.

The issue here which is also noteworthy is the implications that if Mr. Bezos intuitive understanding of what is about to further escalate via the resulting QT initiative, along with the already raising of interest rates is correct. And there’s more reasons to think it is rather than not. This means that all the incessant blathering about how earnings, valuations, “Goldilocks’ economy” and more has been nothing more than absolute garbage – and really never was.

Or, again, said differently: It’s been the Fed, it’s always been the Fed, and without the Fed there is no there there, anywhere.

I believe Bezos gets this probably better than anyone. And, if he’s willing to make such dramatic moves to the howling of politicians and others everywhere, regardless – is it not curious no one else seems to be thinking the same?

Then again, when it comes his judgement in other matters, he still appears to be thinking along the lines of a 12 year old.

However, with that said, when it comes to “pictures?”

The above may be painting something far more revealing than those sent via his email.

© 2019 Mark St.Cyr