Sunday, May 20, 2018

Amazon, Walmart.....Chinese potting soil.....and the 34th Amendment....

As you, my loyal readers know, the unstated (or I suppose now it's "stated") goal of this blog is to make global finance and behavioral economics fun again!....no small task indeed.  Relating macro economic policy to our daily lives, connecting the dots, and managing the minutia comprising the big picture, can be exhausting, confusing and often, even less entertaining than we might have suspected when we first approached the task.  

That said, I'm going to get a little existential in today's post.  One of my favorite topics has always been: 

"What if?"  

I've always liked to imagine (and calculate) what might happen if other things happen (or don't), like some sort of all encompassing, world-wide board game where one event causes a cascade of other actions and those actions perpetuate further actions... the ultimate "butterfly flaps its wings" sort of thing.  "What if?" impacts every aspect of our daily lives in varying degrees.....what if I don't return that library book? (For those readers under twenty-five, a "library" is a public place, usually run by a local government, where old people go to borrow "books"...."books" are....well....never mind....)  What if I had sunk my life savings into Berkshire Hathaway in 1968?  What if I would have not skipped my annual checkup?  What if I would have phrased that last rant to my former, boneheaded boss a little more carefully?  What if I didn't try to run that red light with a trunk full of weed?  What if American bankers would have been less zealous in facilitating near-ZIRP fueled "capital formation"?  

We, as Americans, love to revisit our actions and our decisions, with justification, revision, glee and/or regret.  It all depends on the outcome and product resulting from the decision.  It's the essence of "What if?"  Lately, for better or worse, it's become our National pastime.   



In that vein, one of my favorite movies of all time, and I've probably mentioned this epic in a couple of prior posts, is Frank Capra's "It's a Wonderful Life".  For you Non-US folks in the Caymans and the politburo having someone translate this Blog for you, suffice it to say it's an American Classic.  The gist of the movie clip above, is that George Bailey (played by Jimmy Stewart) is granted an incredible gift from Clarence, an Angel sent down from heaven to keep George from ending his life, by showing him the true value of his existence.  George finds out what the world would have been like had he never been born.  To sum it up..."it ain't good."       

Since this is a financial blog, dedicated to the examination and exploration of what makes global economics tick, exactly how the world works and why butterflies are routinely flapping the snot out of their wings, usually under extreme incentive-ized/motivation/duress nowadays, let's play my favorite, Jimmy Stewart-esque, "What if?" party game I like to call:

"What would have happened if Amazon and Walmart had never been born?"

The first thing we need to do is hearken back to the glimmering past, exploring our roots from ancient times, the good old days that most financial people out there barely remember, say, just taking a date out of the hat, May 15th, 1997.

We need to fully examine where we started in order to understand where we are now, as well as how and why we got here.  May 15th, 1997 was, of course, the date that changed the world as we know it.  May 15th, 1997 was the date of the Amazon IPO.

On the date of the IPO, Amazon (AMZN) was a struggling little book seller with US$16 million in sales, 256 employees and was losing gobs of money.  By contrast, Walmart, America's largest retailer who had begun, at least by sales volume, to dominate the US retail landscape had sales of US$105 Billion, 728,000 employees and had been, like clockwork, producing billions in earnings for years. 

In a market driven economy we tend to celebrate the "winners".  We give them awards and accolades, showering them with praise and treasure, as fair compensation for their genius.  In a market economy, the founders, financiers, inner circle and those who were wise enough to get in on the ground floor, backing the winning horse, are without question, entitled to the spoils of war, so to speak .....but what about the rest of us?  What about the poor, pathetic losers?


What the US economic model never takes into account is....what did we destroy to create the enormous success?  What about those who fought bravely, against overwhelming odds on an unfair, tilted playing field, only to end their careers with an inevitable failure.  What about those who stood steadfast, unwavering at the helm, professionally sailing along in familiar waters, occasionally feeling a few seemingly inconsequential bumps and thuds, piloting through the angry economic seas, ever confident that because of their seamanship and years of experience, that they could weather the storm.  They would sail courageously, as they always had, until one day, despite their herculean effort, they happened to notice that the ship's bow was uncorrectably pointed at an unfamiliar downward angle.  They would fight valiantly to save their vessels.  Alas, without ceremony, the world, and those who could have lent a hand, would fail to notice or care about their plight.  They had become unnecessary, obsolete casualties of the tidal wave..  These brave men and women would eventually find themselves adrift in a life boat wondering where they had gone wrong and what the hell happened?  I am, of course, metaphorically referring to the small town American Retailer (and by extension, small town America) and his/her well designed, meticulously orchestrated, consequently unavoidable, yet truly unfortunate destruction.

Not to give it away, but these wonderful people and places, as you will likely conclude while reading this post, are the ultimate casualties of a completely unfair systemic, economic ass-whooping.  Just like our systematic dismantlement of America's industrial infrastructure, courtesy of Ronald Regan and Paul Volker, i.e.) Manufacturers and factories chased off shore, never to return, as a result of high interest rates and a hard dollar (different financial tools and uniquely bad policy, as well as a topic for a different day......but delivering the same destructive result).... this century's heartland retailers never knew what hit 'em.

NEW IMPROVED FORMAT FOR THIS BLOG

Since I've had rave reviews on the "Red" Executive Summary Format I had implemented in my last post, I think I'll continue the format for this one.  One of the main complaints I get re: my writing is, paraphrased "You go on and on forever about economic and financial stuff that I don't understand and I don't care about.....just give me the bullet points!"

Well, since I believe the "Economic and Financial Stuff" is the heart and soul of this blog, but I fully respect the demands on your time, we need to compromise.  Once again, feel free to read the "Red" Executive Summary and if the details of the section derail your interest, just skip ahead to the next Red Executive Summary!

OK.....let's get started....

American Retail 1997 to 2017

Executive Summary:  American Retail has become grotesquely concentrated in the hands of a few businesses (i.e. Amazon and Walmart).  Mom and Pop, Brick and Mortar Retail has been decimated by this tidal shift much more than we'd care to admit, threatening the economic sustainability of suburban and small town America.  We've embarked on a journey of economic destruction from which there may be no return. 

For your reference, the next Executive Summary is:  "The Randall Park Mall"

So let's compare a few numbers from 1997 to today and see what we see.




















The above figures are from the 10k's.  The first thing that jumps out at us is that American Retail, as a whole, has done very well.  Revenues for the "Top 10" and Amazon have grown from $304 Billion in 1997 to a whopping $1.323 Trillion (Including Estimated GMV) in 2017.  Earnings for the group have nearly tripled from $7.6 Billion in 1997 to $23.4 Billion today.  Remarkably, the value (Market Cap) of these same businesses has increased nearly 10 fold from $131 Billion to $1.080 Trillion with P/E and P/S+GMV ratios roughly twice what they were 20 years ago.  Bravo American Retail!

The other thing we might notice from the schedule is that if you were astute/smart/lucky enough to invest in Amazon and Walmart in their infancy, you've done really well.  In fact if you bought Amazon at the IPO your initial $1,000 Investment would be worth roughly $1 Million today at a $1,500+/- per share, split adjusted stock price.  Truly an incredible success story.  On the other hand, if you stuck it out with the "Other 9" of the "Top 10", based on their languishing market caps and the liquidation and consolidation going on in the rest of the industry....you didn't do very well at all.

To wit, this is just another example of the winner take all, no holds barred mechanics of a market driven economy.  To the victors go the spoils.  If the rest of the retailers would have simply seen what was happening, thrown up websites, redeployed their capital and started doing eCommerce like gangbusters, in aggregate we would have been in the same place we are today.  The total pie would have been allocated a bit more evenly, Amazon and Walmart would be smaller and the "Other 9" would be bigger, but we would be in the same place we are today because the economic needs and wants of the consumer would have been served.  In "econ" terms, it doesn't matter who serves the need as long as the need is efficiently met.  Unfortunately, the only possible conclusion we can come to is that the  managers of the "Other 9" were all really stupid, incompetent people who couldn't see the tsunami coming and were unceremoniously washed away by the wave.  Who hired those Bozo's anyway?

Does this make sense?  Are we all in agreement so far?  Everyone in the industry was an incompetent boob except for Jeff Bezos, Sam Walton and their respective henchmen.  Perhaps the managers at Sears, K-Mart, May Company, Federated, Macy's, Toys R Us, etc. might disagree.....but hey, the numbers are the numbers.

Now let's take a look at the earnings produced over the last 20 years for the two "Big Dogs" of retail.  To be honest, I can't think of any other company in the history of finance that's accomplished what Amazon has.   In looking at these figures, I was compelled to come up with a new metric, that until now, has never been needed.  I call it the P/E20.  (the ratio of a stocks Market Cap to the last 20 years of earnings).

In the last 20 years the Amazon business has produced $13.4 Billion in earnings and sports a valuation of 42.69 x those earnings, compared to Walmart's $235.9 Billion in earnings, valuing WMT at a P/E20 of 1.32.  Again, I'm not talking about a Current P/E (Price/Current Earnings), of 42.69, which would be rich for any retailer.  I'm talking about a P/E20, the ratio of a company's Price (Current Market Cap) divided by the last 20 years of earnings.  If any of my readers know of any other large, well established business (20 years or more in existence) on the planet that has ever come close to a P/20E like this, I'd love to hear about it. 

So now, let's make some calculations which illustrate the utter buffoonery of virtually every retailer in America (Except, of course, for Amazon and Walmart).  The schedule below again compares the American Retail Landscape, per US Census Data, from 1997 to 2016 (2017 is not yet available, but I trust the trend is directionally correct....so humor me here.)































We can see/infer a couple of things from the above:

  • Amazon and Walmart today control/handle roughly 42.4% of all retail through their ecosystems, up from Walmart's share (Amazon didn't exist) of 10.4% 20 years ago.  The "Top 10" Retailers (Plus Amazon) in America control about twice as much of the market (59%) as they did 20 years ago.
  • Somehow (I'll describe the "somehow" farther along in this post), Amazon was able to accomplish this massive assault on Market share at virtually no cost.  There was no meaningful requirement to supply shareholders with earnings or dividends.  At the time, Shareholders were apparently tickled pink with with the potential for stock price appreciation (and in hindsight, rightly so). One of my favorite lines out of any filing (ever) was from Amazon's May 14th, 1997 S-1:  "The Company believes it will incur substantial losses for the foreseeable future... the rate at which such losses will be incurred will increase significantly."  I doubt that, at the time, Shareholders thought "foreseeable future" meant twenty years.  I would have also been really interested to hear, again, at the time, what Shareholder reaction might have been if that statement would have appeared in a Sears, Target, K-Mart or even Walmart 10-K at the time.   
  • Amazon was able to expand their business with virtually "free" equity and more recently, debt financing.  They've added leverage (Long Term Debt) to the tune of $46 Billion (35% of the $131 Billion Balance Sheet), with another $118 Billion of off balance sheet commitments (leases and the like) all taken on in the last few years.  In 2010 Amazon's total Long term Debt was only $1.5 Billion (8% of a $18.7 Billion Balance Sheet).  See Notes #5, 6 & 7 on the 2017 10-K (pg. 56-58)    
"Doing more with less" is the essence of productivity.   So let's see how the "Top 10" did when compared to what we'd expect had they grown at the rate of the US Economy and Markets.  The Chart and table below describe "What if?" and compare our expectation, based on the US Economy, to what actually happened.  

When we look at what the "Top 10" Actually did (3rd set of columns), compared to what we would have expected them to do (2nd set of columns) we see that they've exceeded expectations.  Revenue was 27% higher ($871.8B vs. $683.4B), Income was 19% greater ($20.4B vs. $17.1B) and the value of these businesses was 10% greater ($508.6B vs. $461.3B)  Nice Job "Top 10"!







































On the other hand, when we look at the "Top 10" PLUS Amazon (4th Column). We see that this group of businesses becomes an absolute economic juggernaut compared to the rest of the economy.  As a group, Revenue (Including GMV) has nearly doubled our expectations ($1,328.B vs. $683.4B).  The Market Cap for these businesses has also more than doubled from what we would have expected.  ($1,080.6B vs. $461.3B)  Oddly enough, earnings have only increased by 36% over what we would have expected.  Hmmm.....that's odd.  Oh well, you know those wacky accountants, hard to tell what they are thinking when they put these numbers together.  Let's move on.    

Whenever we see a group of competitors, in this case the "Top 10" plus Amazon, doing "this much more with that much less" in a Market driven economy we can pretty much guarantee that somebody else has been smacked around pretty good, in economic terms of course.  

I remember when I was a young accounting manager for an operating division of a Fortune 500 Company (at least it was at the time), I was bound and determine to save both time and cost by automating our financial statement preparation.  At the time, the process involved gathering info from "Main Frame" general ledger reports and hand writing the numbers on a "13 column" paper spread sheet.  A team of clerks added the numbers up on "ten key" adding machines with paper tapes as documentation.  Once everything "balanced" and carried forward from the prior period(s) we would have the numbers typed on a paper report, which would have to be proofed and corrected until it was accurate.  This, as you can imagine was an iterative process.  People made mistakes and typos.  It would take a dozen or so clerical staff weeks to complete the reports.  

The project that we proposed and subsequently implemented, was that the financial statements were to be prepared on a "personal computer".  We went this direction because we were told, by the IT Department, that it would cost "hundreds of thousands of dollars" along with additional "update costs" to program the mainframe to process the data the way we needed it.

Don't laugh, but we went out and bought one (1) Radio Shack TRS-80 "portable PC" with the "Visicalc" spreadsheet program preloaded.  The system had, as I recall, something like 32k of memory.  The salesman told us that we could store "hundreds of pages" of information on the 8 inch "floppy disks" and it would only take a "minute or two" to print a page on our "dot matrix" printer.
       
Of course, after we determined that we were indeed doing "much more with much less" and that the project was an incredible success, it was obvious that we only needed a couple of clerical people to get the data into the spreadsheets.  So as we often do in Corporate America, we gave these good folks, some of them who had been with the company for decades, the boot out the door.  Of course we offered a few of them jobs working in the factory and we gave a few of the more "well liked" folks "going away" parties with cake and coffee in the break room.  We told them how much we appreciated their efforts over the years, wishing them all the best.  I remember a wonderful lady crying on my shoulder at a local coffee shop wondering "what am I going to do?"  Luckily, I'm sure she and her friends all found other, better jobs and did just fine, at least that's what we like to tell ourselves when people we are fond of become victims of "doing more with less".  

Anyway, let's take a look at how Retail Employment has fared over the last twenty years while the "Top 10" and Amazon have flourished.  The FRED (Federal Reserve Bank of St Louis) Graphic shows total retail employment indexed to January of 1997 = 100.  
























As we can see, the numbers are pretty dismal.  The actual numbers: "Total Retail" (Red Line) increased by 11% in the last 20 years.  "Department Store" Employees have actually declined 22% over the same period.  The entire industry is doing a "Shitload more with much, much less."  We've got productivity oozing out of every orifice!     

Transparency

On more thing that has bothered me for a while now is that neither Amazon nor Walmart disclose GMV.   As you know, simply put, GMV is a measure of goods that are sold through an eCommerce ecosystem even if they are someone elses (i.e. 3rd party sellers).  I touched on this phenomenon a bit in my post:  Cheap Reading Glasses, Handbags and....the Wiemar Republic...  Both Walmart and Amazon have significant third-party GMV, yet, nowhere in there filings do they ever come out and say what the GMV actually is by quarter, leaving analysts to guess.  The point is that both Amazon and Walmart "control" significantly more of the retail footprint in this country than we think.  Why don't they disclose these figures?  From my personal experience as an underwriter, if you can't get a straight, transparent answer to a simple question, there's a very good reason for it. Unfortunately, the "good" reason often isn't all that "good".

Wouldn't it be great if some analyst on the investor calls for Amazon and/or Walmart, right after the obligatory "amazing quarter guys" intro, asked "Hey, by the way, how much GMV do you guys actually have and what percentage of that GMV comes from goods originating in China?"  My guess would be that we'd get a Zuckerberg-ian "I'll have to get back to you on that...."

Anyway, rather than get actual numbers, we get charts like the one below, showing rates of growth and other ambiguous commentary, yet we have no idea what Walmart's and Amazon's third party sales actually are.  Growth rates?  That's fine...but where are we starting from?  Growth from what?

Even in Walmart's stellar earnings release just a few days ago, management claims that eCommerce Sales have accelerated 33% YOY, yet they don't actually tell us what the GMV actually is.  The must know....otherwise, how could they calculate the percent increase?  Why can't Amazon and Walmart just tell us how much third party, plastic, Chinese junk they are selling on their sites?  They are the self proclaimed masters of big data, we're big kids, we can take it.....just tell us!

Anyway, at least I can't find any references to third party sales or GMV (in dollars) in the filings and I've searched pretty well.  If any of my readers have these numbers, or any insight, as always, I'm all ears.

Given the aforementioned, the point of this section is to illustrate the scope and magnitude of the incredible economic ass kicking American Retailers not named Amazon and Walmart have taken over the last twenty years.  

Now lets look at a case study......

The Randall Park Mall 

Executive Summary: This Section is primarily a pictorial history illustrating the carnage that's taken place in America as a result of the enormous "success" of Walmart and Amazon.  The Randall Park Mall was the largest mall in America when it was built and the retail centerpiece of Northeast Ohio.  It's now an abandoned shell, along with hundreds of other defunct, vacant malls, shops and storefronts all over the country.  Wherever a Walmart-Bomb is detonated, economic carnage is soon to follow.  The pictures serve as a cautionary tale of where we've come and where we're headed.  Feel free to scan through a few of the pictures or click on a video link or two if you are interested in some of the human tragedy associated with our macro-economic policies and the facilitation of what Jay Clayton refers to as "Capital Formation".... 

The next Executive Summary is:  Chinese Potting Soil....  

In 1976, the Cleveland Plain Dealer (Cleveland's local newspaper) ran the following piece which describes the optimism and the community feeling attached to the Randall Park Mall (RPM) development.  The "mall" was the retail cornerstone of the time and the RPM was one of Eddy Debartolo's  crowned jewels.


Cleveland Plain Dealer
August 9, 1976

Just about every superlative in the English language has been applied to Randall Park Mall, opening this week in the southeast suburban area of the city.

Indeed, the mall IS the world’s largest shopping center.

Yes, it is a place of exceptional convenience and beauty, with an unusual number of outstanding department stores and many, many fine shops presented in a most expansive, luxurious arrangement.

And it represents an enormous investment of energy, time and money by its developer, Edward J. DeBartolo of Youngstown.

But there is more meaning than this to Randall Park Mall -- considerably more.

The mall constitutes a community improvement in which all of Greater Cleveland can share pride. Its construction is an expression of solid confidence in the region’s economic present and future. Unquestionably, this will be a catalyst for future growth.

It is significant that Randall Park Mall brought a new addition to merchandising in Cleveland. Joseph Horne Co., the prestigious Pittsburgh-based retail firm, placed its department store in the distinguished company of four similar businesses that have been long established and successful here. Horne’s, it should be noted, has a 127-year history of success and growth.

It was 12 years ago that DeBartolo first announced his plans for the future use of the Randall Park race track site which he acquired in 1961. The plans at that time proposed an $85 million development including a single-level shopping mall and three department stores.

Unlike some developers who let their dream projects shrink or fade away, DeBartolo made his come alive and grow. The remarkable accomplishment that now is the two-level, $300 million Randall Park Mall, therefore is a testimonial also to the business courage, confidence, discernment and foresight of DeBartolo himself.

It is good for DeBartolo that he has attracted nationwide notice as the country’s leading builder of shopping centers and malls. It is good for Cleveland, too.

For today and the tomorrows to come, Randall Park Mall is a highly visible mark on this area as a quality place to live, work and do business.


http://clevelandcentennial.blogspot.com/2012/04/randall-park-mall-op-ed.html

Here's a wonderful Cleveland Plain Dealer archive photo of the Grand Opening of the "World's Largest Shopping Center" just 40 short years ago.  You can almost feel the excitement in the air!



Now let's fast forward to today.  The Randall Park Mall, the jewel of Cleveland Retail, closed for good in May of 2009.  Here are a few pictures of what the property looks like now.  I'm sure, not exactly what Eddie DeBartolo envisioned.  Tragic.



Pretty sad isn't it?  My...how times have changed.  The "Mall" used to be the place to go.  Shopping, dinner out, meet your friends, movies, shows....Realtors marketed homes based on their proximity to the mall.....now.....not so much.  The Randall Park mall is our local poster child for what's happened, but the Walmart/Amazon impact is everywhere.  Every small town in America has experienced this onslaught.  Whether it's a Walmart-Bomb, dropped on a small town, wiping out every retailer within 20 miles of ground zero, or Amazon, delivering third party GMV to your door sales tax exempt (for "free" with Amazon Prime) local, town square retailers and their employees are largely gone now. 


Even Walmart is not immune to the reshaping of the American economic landscape.  I think the statistic is something like "90% of all Americans live within 15 miles of a Walmart", the company isn't invulnerable to a few math mistakes.  Once they drop a "Walmart Bomb" on a community, if their calculations are a little off and the store (Combined with the Amazon impact) has caused even more destruction to a local economy than they had initially forecast, when they determine they can't meet revenue and profit targets, they simply close the store and walk away, leaving the local community and the original developer (Most of the stores are built by a third party, often local, developer and leased back on a 20/30 year lease) to deal with it.



The irony is that many of the above failed stores were probably the subject of an incredible competition between regional communities, in a "local government spending-spree-arms-race" offering tax abatement, free land, additional infrastructure and financing assistance to build the stores, all in the name of landing the fools gold, incredible economic growth engine that is marketed to them i.e.) a Walmart Super Center.  The thinking was that people would come from miles around to work at and shop at Walmart, bringing jobs and tax revenue into the "winning" community.  The good folks in the area, rather than buy the overpriced, limited selection goods from the uncompetitive local retailer up the street, would flock to the community that had "won" the Walmart.  The "winning" community would be much better off than the surrounding communities.  Unfortunately, what the local governments didn't/don't seem to understand when they are succumbing to the Walmart siren song, is that the profits that used to stay in their communities, with their local retailers, were now going to Bentonville and Beijing. (I'll explain why I say Beijing shortly)  On the other hand, if Walmart didn't kill the local brick & mortar retailer, Amazon eventually would.  So the Walmart-bomb is a bit like retailer euthanasia for those local businesses that just didn't stand a chance.


On a positive note, at least Walmart allows America's homeless folks to camp out in their parking lots now.  It must be a giving back to the community, corporate responsibility sort of thing.  Their new slogan should be "If you've got a car, you've got a home at Walmart!".  One interviewee proclaims that "A lot of homeless people aren't bad people, they're normal people.....I was halfway normal until I started living this way."

Don't get me wrong, I'm glad Walmart is trying to be part of the solution.  In hindsight, if we could go back in time, I wish they could have understood that they are also part of the problem.  The clip below brings a tear to my eye.....



The final irony is that the Randal Park Mall has now been chosen as the future home of an "Amazon Distribution Center".  The competition was again fierce.  The City Council relishes this as an amazing coup!  The community only had to offer Amazon a 15 year, 75% property tax abatement and finance a whole smorgasbord of additional infrastructure improvements, all in exchange for a nebulous promise that Amazon would at some point employ 2,000 people, presumably lower skilled folks running between conveyor belts where it's apparently too dangerous or onerous for expensive robots to go.  (This video clip shows how an Amazon package receives less than 60 seconds of human contact to be picked and shipped....it really is amazing!......but doesn't exactly bode well for the veracity of Amazon's nebulous commitment of 2,000 jobs.....I'm sure efficiency will improve and they will continue to do more with less.)

Of course, even with all of the assistance and Corporate Welfare provided by local and State governments and the unfettered access to low cost Wall Street Capital Formation, to the detriment of Mom & Pop retailers, the United States Postal Service apparently felt, for whatever reason, that the playing field wasn't sufficiently tilted in favor of Amazon and Walmart.

Amazon and Walmart's cost to ship a package via the USPS is apparently a closely guarded national secret.  The only thing we can tell for sure is that the price charged to ship a package under the terms of the Amazon and presumably, the Walmart contracts, with the US Post Office is signifficantly less than you or I pay to ship the same package.  In my humble opinion, it shouldn't cost Amazon a third of what Aunt Millie pays to mail her Christmas presents.....Amazon shipments should be subsidizing Aunt Martha....not the other way around.

Moreover, It shouldn't cost a Chinese seller less to ship his package 12,000 miles than it costs the local hardware store to mail a package across town.  But it does.  Think about Chinese GMV sold on Amazon and Walmart.com.  These ePackets are delivered under yet another under priced "deal" which put one more nail in the coffin of America's Heartland retailers.

In the continued relentless spirit of cost cutting and doing more with less, Amazon is continuing to pioneer new delivery methods which cost even less than their cost under the USPS contract.  The plan involves taking advantage of the recently unemployed (perhaps former retail and manufacturing workers) who don't understand vehicle depreciation.  The Amazon-Flex scheme is to have these Uber-like people, who apparently can no longer find work, deliver Amazon packages using their own vehicles for a few dollars a package.

It seems we've made the unconscious decision that small town American Retail in no longer needed.  America will be fine with two large retailers controlling the supply of virtually every item that goes into every home in Heartland America along with the permanent, irreversible contribution to trade deficits that go along with this structure.  If you want to truly change behavior and level the playing field, raise postage rates on the Amazon and Walmart.com contracts, eliminate the ePacket shipping subsidy and tax FedEx & UPS per delivery.  Eliminate the eCommerce sales tax loophole which automatically gives Amazon.com, Walmart.com and other "non local" on-line sellers a 5%-8% discount/subsidy over local retailers.

To sum it up, Amazon, the company that was primarily responsible for putting the Randal Park Mall out of business (Economic destruction of Real Estate value to the tune of $300 Million in 1976 dollars, in addition to the years of losses accumulated by the Mall and its tenants) is now going to occupy the site at an incredible discount, with a substantial part of the new investment coming from local tax payers.  As an aside, it's strange, when I renegotiated my office lease a few years ago and requested a 75% tax abatement, free rent and a slough of leasehold improvements, the property manager told me it was "take it or leave it" and suggested I just look somewhere else.  Perhaps I should have gotten an Investment Bank behind me, offered to lease more space and provide 2,000 jobs at some point in the indeterminable future?  I guess we'll see how this goes. 

The Worst Places to Live in America

So the question is, specifically with regard to Walmart, when we are talking about the decline of small town American Retail, and again by extension small town America, are we talking about the chicken or the egg?

As I mentioned in the opening paragraphs of this post, the high interest rate policies of Volker and Reagan, though ancient history, were the first salvos in the disembowelment of the American Economy.  The best reference I can cite for this is William Greider's "Secrets of the Temple", (You can pick it up on Amazon) which I first read in 1987 and took the time to re-read recently on a couple of long flights and layovers.  I was considering writing a piece on it, revisiting the concepts and how the world has moved forward from then, but I wasn't sure there would be any reader interest.  (i.e. In today's news cycle, If it didn't happen yesterday nobody cares)

I strongly encourage any of you who haven't read this book to get to know it.  It's well worth the time even though it's slightly more than 280 characters (700 +/- pages).  Suffice it to say, after the first economic shots were fired by Reagan and Volker, the second volley in the war on the American economy was fired by Amazon, Walmart and Beijing in the 1990's.  Again, I'll explain this Beijing reference shortly.

So let's take a look at the relationship between America and the Walmart/Amazon competitive duopoly.  Both Walmart and Amazon are the most subsidized recipients of corporate welfare in history.  Tax breaks and free land with politicians and developers falling all over themselves to "land the big fish" hoping that their communities will be the last standing in the fifty mile retailer-kill-zone radius.  The ultimate coup that both of these businesses were able to exploit, to the detriment of every other retailer was a carefully implemented global supply chain, subtly and cleverly influenced and designed by the Chinese Communist Party.  (CCP) 

But first, let's take a look at a few towns and cities that have fallen victim to the Walmart-Bomb blast radius.

Here are the Twelve (12) worst big cities and Ten (10) worst small towns in America.  (Note: The lists are an opinion of each of the authors, feel free to choose your own "list" but suffice it to say that the presumptive relationship would seem to hold.  The places with the greatest unemployment, highest crime rates, and most substantial economic malaise all seem to have Walmart as an "anchor tenant".  i.e.) The More Walmart is involved in the local economy, the more the town seems to resemble a "shit hole" (a recently coined White House term referring to "underdeveloped" or "economically challenged").  Here are the lists:

The Ten (10) Worst Small Towns in America



1.) Gallup, NM - Walmart Super Center
2.) Fort Pierce, FL - Walmart Super Center
3.) Elkhart, IN - Walmart Super CenterWalmart Super Center (Note: Elkhart, IN actually has two Super Centers.  Walmart is actually Elkhart's largest employer.)
4.) Leitchfield, KY - Walmart Super Center
5.) Pine Bluff, AK - Walmart Super Center
6.) Rocky Mount, NC -  Walmart Super Center
7.) Anderson, IN - Walmart Super Center
8.) Niagra Falls, NY - Walmart Super Center
9.) Ardmore, OK - Walmart Super Center
10.)  Kokomo, IN - Walmart Super Center 

The author of the above "The World According to Briggs" has a couple of caveats for his list, the most relevant being that he does NOT list any dumpy California small towns on the list, ostensibly because there are just so many of them that they would dominate the list.

The Twelve (12) Worst "Big" Cities in America



1.) Camden, NJ - 9 Walmarts
2.) Detroit, MI - 15 Walmarts
3.) Cleveland, OH -  ONLY 3 Walmarts
4.) New Haven, CT - 1 Walmart
5.) Memphis, TN - 7 Walmarts
6.) Stockton, CA - 2 Walmarts
7.) Birmingham, AL - 13 Walmarts
8.) New Orleans, LA - 8 Walmarts
9.) Oakland, CA - 2 Walmarts (One closed in 2017)
10.) Modesto, CA - 3 Walmarts
11.) Reno, NV - 6 Walmarts
12.) St Louis, MO - 4 Walmarts

It's tough to argue with the accuracy of this list, even though Cleveland, my current beloved home town and the (current) home (via Akron) of LeBron James, with all of the great restaurants and night life, the 2016 Republican National Convention and the birthplace of the incredible burning Cuyahoga River trick (Don't worry that was years ago, the fire's out and we've cleaned it up.....that's just the first thing people think of when I mention Cleveland).  Anyway, it would be nice to know why in the world a relatively small little berg like Camden New Jersey needs nine (9) Walmarts, or relatively tiny Birmingham Alabama needs thirteen (13)?  Doesn't anyone shop anywhere else?  Is the crime so bad in these cities that all the defenseless, unarmed, shopkeepers have closed their doors and are gone for good?  The only source of food and clothing left in the area are highly fortified, well defended Walmart Super Centers?  Walmart is the  last bastion of refuge, the only sanctuary for the surviving, hopeless huddled masses?

Alternatively, is it possible that the Walmart/Amazon impact is at least partially to blame for this economic debacle.  If you ask the residents of the above communities if they'd rather have "Always the Low Price" or a job, I'd guess most of the residents, at least the ones with some initiative and work ethic might respond "I'd like to have a job".  On the other hand, if you ask, would you always want the "Low Price", or would you want your neighbor to keep his job?... the decision becomes much easier.

Unfortunately, whether we're a Walmart shopper or a hedge fund manager we don't make that decision consciously.  We just jump for what we perceive as the best deal, value or "low price", regardless of the inevitable consequences outside of the immediate transaction.  We believe that our decisions are independent, yet they are all subtly causal and ruthlessly related.

I'd suggest that the Chinese Communist Party (CCP) has long been well aware of this little nugget of market-driven wisdom and they've ruthlessly used it to their economic advantage. 


Chinese Potting Soil.....

Executive Summary: A substantial amount of Walmart's and Amazon's Inventory as well as third party GMV, despite the perception that these businesses are great "American" businesses, is not "Made In The USA" .  Moreover, much of the third party GMV is from questionable sources.  (Again, neither Amazon nor Walmart disclose GMV.  As a matter of perspective, eBay, a much smaller company footprint by any standard, pumps out GMV of roughly US$80 Billion annually.)  

In this section we examine oddly priced, $250 a bag "potting soil" sold by a New Jersey Distributor "We The People" as one such example of the many dubious offerings available from un-vetted third party sellers.  In all likelihood, these odd examples of absurdly priced goods sold by shell company websites are likely designed to move money to places it shouldn't go.  Of course, I'm not accusing anyone of anything here, but lets say, hypothetically, that a Chinese drug smuggler wanted to get paid.  He might start a New Jersey Distributor and instruct his customers to purchase "luxury potting soil" as payment for Opioids.  The payment makes its way back to China, ostensibly as payment for the potting soil.  I picked this example solely because I find it pushing the envelope of absurdity.  There are lots of "less goofy" products out there, but they all serve the same purpose, to get money back to China via dubious GMV on Walmart and Amazon storefronts.  I'm hoping this piques your curiosity since, at least to me, it's actually pretty entertaining financial comedy.

The next Executive Summary is "Dirty Laundry...."    

Well, spring has sprung and I have some annuals I want to put in now that it's only snowing every other week here in Cleveland.  Time to get busy with my gardening!  We have these wonderful hanging baskets on our front porch.  Wax Begonias thrive in the shade and look beautiful in the baskets.   Of course, I wanted to get some new potting soil and I really prefer the best available, since the plants thrive with a high quality mix.

Obviously, the first place I went to research something like this, like everything we buy as American Consumers, was Walmart.com.  Walmart, as we all know, is fantastic for things like this since they are "Always the Low Price" and there's a Walmart Super-Duper Center only 3 miles (much less than 15 miles) away from my home.

I put "Potting Soil" in the Walmart.com search bar and sorted from highest to lowest price (I always want the highest quality) and WHOOOOAHHH! I found some really expensive potting soil!  $250/per bag!....$5.00 a pound for dirt! Hardly "Always the Low Price!"




   


https://www.walmart.com/ip/BUMPER-CROP-ORGANIC-SOIL-AMENDMENT/165159583#read-more

I've posted these links along with the screen shots to document the existence of this "magic dirt", presuming that once this blog gets to the appropriate level of management at Walmart, that these links and "We the People" postings will be long gone......only to be replaced by other weird newly created vendors selling $1,000 dust mops or $500 garden gnomes, in the never ending game of OJ Simpsonian-Zuckerbergian whack-a-mole....and a never ending search for "the real killers".

This really awesome (and expensive) potting soil is sold by a third party seller that goes by the name of  "We the People".  When we examine the price points in descending order,  after the "We the People" products listed on Walmart.com, the price drops off dramatically to about $30.00 for comparably sized bags/products.  When I look at the same "Master Nursery" product on Amazon.com it's about $30.00.  (I bought a 46 lb. bag of good old Akron, Ohio "Miracle Gro" dirt for about $8.00.)  That seemed like a much better deal to me.

As an aside, if Walmart wanted to compete head to head with "We the People" in the "$250 a bag luxury dirt" segment, don't you think they could have just asked a few of their home and garden department employees to grab some shovels, go out back, dig up some dirt up and bag it off?  The margin would be HUGE!


Since I knew virtually nothing about luxury dirt, I needed to find out more about the "We the People" Company.  Incredibly, they get hundreds of favorable reviews on their $250/bag potting soil, mostly written by people who can't spell and have problems with "good English".  Their logo is also an odd version  of the American flag.





















When we click the "About this seller" link we get the following:

https://www.walmart.com/reviews/seller/335?offerId=4D3C6822EF1C49B49A0030892EEE8E2E

About this seller
'We The People' has a combined experience of over 50 years in merchandising, consumer goods and most importantly, customer satisfaction. We come from humble backgrounds where we work hard and take care of our homes and families. We aren't complicated people. We like having fun and helping others! WTP offers a wide variety of merchandise at great pricing, all ready to ship right to your door! Our goals is simple, provide the greatest shopping experience possible while continuing to make improvements on a daily basis. We strive to deliver greatness. Let us know how we can help you today!
I for one think that this is just AWESOME!  50 Years of EXPERIENCE! What a great American business model!  Their marketing people are cutting edge!  They cleverly use self deprecating, incorrect tense and odd grammar to fit in with "real" Americans!  Oddly enough, there was no phone number or address listed for "We the People" on Walmart.com.  There is only a mention that they don't collect sales tax in any states except New Jersey.  Moreover, the only way to contact them under the customer service tab on Walmart.com is through an email address:

 support@essentialhardware.com.  
That's strange, who is "EssentialHardware.com"?  When we do some poking around through New Jersey public filings we find that they are a relatively new company called Dukat, LLC (Incorporated about 6 years ago....slightly less than 50 years).  Additional DBA's, which generally link to websites littered with misspellings and bad grammar are: Bargain the People, Essentialhardware.com, Grace's Greens, Heads Up Action,.Marine Screens, Offtopia, Pup Daddy, Skoozel, Tech To Commerce, We the People, Yumza
Here's the BBB report:
When we poke around a little more, we find some more, oddly familiar, goofy language, mimicking the Walmart.com "We the People" seller info, from their EssentialHardware.com website:
At Essential Hardware we come from humble backgrounds where we work hard and take care of our homes. We aren’t complicated people. We like having fun and helping others, we enjoy spending time with our families, and most of all we’re obsessive about doing more with less. It’s who we are - and now it’s how we do business. 
Now of course with all of these items available, you might be wondering where we keep them all. Well for one thing, we have warehouses all across the country tucked away in beautiful locations right near you so shipping is always efficient and speedy. And our custom distribution method is the only way to deliver this many products so affordably - something we are constantly improving on to save you even more time and money.
According to MarketplaceRating.com: 
"We the People"  is one of the TOP 500 sellers on Walmart. The average price of all their products is $35. They currently stock 10,000 products in Seasonal, Office, Auto & Tires, Home Improvement and Music categories. Browse all We The People products here.Last month reviews data shows, that "We The People" is in the 138th place. According to feedback numbers of the last year "We The People" was doing better - they were number 83rd. For the latest reviews please check their page on Walmart."
I've also posted a couple of the 550+ Walmart.com Reviews for "We The People" below.  They are pretty much are all like this.  Either the reviews are 1.) "Five Star" with either no comment, or misspelled, grammatically odd kudos; or 2.) "One Star", generally hateful commentary, presumably from people who had accidentally purchased something from this dubious company.  Hmmmmmm......
























I particularly liked "came quickly in mail, packaged carefully for a toxic product"

I hope they weren't talking about my luxury potting soil!

Master Nursery  is apparently the "Manufacturer" of the products in these $250/bag "We the People" offerings.  The primary distributor is "The Coast of Maine" for both the "Bumper Crop" and "Gardner's Gold" potting soil products.  These products are also certified as "Organic" by OMRI (Organic Materials Review Institute). 

I reached out to these three organizations by both phone and email, asking about the "$250 a bag Walmart dirt", I provided links to the products and specifically asked where this really expensive dirt was being manufactured.  Neither Master Nursery or The Coast of Maine responded.  I'm guessing they thought I was a lawyer.  OMRI responded via email as follows.

"Thank you for contacting OMRI.  You will need to contact the company for more information about their product.  Have a great day!  Warm regards,  Josna"

Apparently, the organization that "certifies" this $250/bag dirt as organic has no idea where this awesome dirt is made, or if they did, don't want to disclose it.  

So now let's take a look at the a sample of Walmart's Inventory.  Rather than plunk down $250 for designer dirt from "We The People" I thought I'd go "old school", avoid eCommerce and drive to the Walmart to pick up a bag of dirt myself.  As I drove past the rows of vacant, boarded up neighborhood store fronts, ripe for redevelopment, I felt a sense of hope that maybe Amazon or Walmart might someday make use of this space, perhaps robot/drone manned kiosks?  With luck, they could put a specialized, automated luxury Chinese-dirt kiosk right on the corner where that abandoned hardware store stands now....I'd never have to leave the gates of my development! 

As I was walking through Walmart trying to find the luxury dirt bags, I came up with a wonderful game.  I took my Motorola/Lenovo (Chinese) smart phone (which I really like) and took random pictures of the "Made in" tags.  The rules of the game were, 1.) I would not include TV's and phones (none of those are made in America anyway and that would skew the sample), and 2.) That I would not include food or health and beauty products presuming that a.) The FDA has a reasonable control of our food supply and b.) Most of America's food and hygiene products are manufactured by great American companies like Nestle', Unilever, Danone and ABF.

   
To accomplish this sample, I randomly walked through Walmart, took 20 or so steps, walked to a shelf, grabbed an item and snapped a picture of the inventory tag showing where the item was "Made in _____".  Pictures of the tags and the results are posted below. 

























The result is that, not surprisingly, virtually nothing at Walmart (6% of Sampled Inventory) is made exclusively in America.  To be fair, 19% of the Inventory is actually "Made in the USA with Globally Sourced Parts" which generally means that foreign made parts are brought here, slapped together and put in a box, appropriately labeled as "Made in the USA (sort of)".  i.e.) Trash bags are "Made in America with Globally Sourced Parts".  I can't tell for sure but there are only two parts to a box of trash bags (the box and the roll of bags), so either the trash bags or the box were "made" in the USA.  My bet would be on the box.

As expected, 19 of the 32 goods sampled (60%) are made in China.  Interestingly, iconic American brands like Wrangler Jeans and America's pastime, Major League Baseball (MLB), have chosen Nicaragua as their licensed production source while the National Football League (NFL), the sport of America's heartland, went with Vietnam to produce their replica jerseys. 

The only conclusion I can come to from this albeit limited, statistically insignificant sample, is that virtually nothing sold by Walmart, Amazon and by extension "American Retail" is actually "Made in America" anymore.  Even though most of the goods sold directly by Amazon and Walmart (and included in Revenue) are presumably legitimate, I have significant concerns as to the "Third Party GMV" which neither Amazon nor Walmart have deemed important enough to disclose.  I initially described this phenomenon in my October, 2016 post entitled: Cheap reading Glasses, Handbags.....and the Wiemar Republic.... where I talked about the significant level of "odd" and presumably "fake" third party sales listings on US eCommerce platforms.


Dirty Laundry

Executive Summary:  Any auditor would tell you that the easiest way to launder money is to bury smaller transactions in heaps and piles of larger transactions.  Like, perhaps, buying $250 bags of luxury dirt with a Walmart MoneyCard on Walmart.com.  The Chinese have a cute little term for this known as "Ants Moving House".  The core meaning of the phrase is that the strength of one "ant" is insignificant, but armies of "ants" working as a team can actually lift a house off of its foundation and carry it to the desired relocation.  This phrase was coined when describing how enterprising Chinese people get RMB off the mainland and converted to Western Currency denominated assets.  In this section we'll discuss the probability that there is significant money laundering going on through both Amazon and Walmart.  We'll discuss how easy it might be to set up untraceable, re-loadable Walmart MoneyCards and AmazonCash.  We will discuss buying allegedly "fake" goods from "fake" Walmart or Amazon storefronts (Again, like $250 bags of dirt through "We the People" for example).  

We'll discuss:

  • GreenDot Financial, the newly created (IPO 2010:NYSE:GDOT) Walmart MoneyCard issuer with their sole offshore office in Shanghai.
  • Practical applications of "Ants Moving House".
  • Amazon's rapid expansion into location based re-loadable, "no credit check needed" debit products (Amazon Cash)
  • The minimal (read none) requirements necessary to set up an Amazon or Walmart Storefront.
  • The ease at which anyone can set up a Walmart MoneyCard with no identification required.
  • The corporate "land rush" to get in on the lucrative "no credit check" US Money laundering business. 
As always, if you don't want to immerse yourself in the disturbing, yet fascinating economic details, feel free to skip ahead to:  The Vancouver Model  where you will most likely be even more disturbed.

For obvious reasons (Who wouldn't want Billions of dollars of free float!), there's a mad scramble out there right now for brick & mortar chain retailers to get into the "No Credit Check" high-fee/re-loadable/debit Cash Card" business.  The first, and most obvious reason to get involved in this under-served market, is that the market is huge.  In 2015, roughly 40% of the adult US Population was "unbankable" (i.e. for various reasons unable to own a bank account) and the ratio is on the rise. 

Of course, there are lots of understandable reasons for good folks to lose banking privileges in America.  Job loss, medical bills, disability, etc. just to name a few.  There are also lots of "not so good" reasons (i.e. criminal activity, evasion of court ordered judgments, garnishments and seizures, citizenship issues, a potentially nefarious desire just to stay "off the grid", etc.)  In any case, all of the aforementioned comprise the "No Credit Check" high-fee/re-loadable/debit "Cash Card" target market. 

Let's take a look at how easy it is to get a Walmart MoneyCard product.  Basically, you show up at a Walmart, in person at a register or the customer service desk, give them some cash and that's it!  Since I happened to be down in West/Central Texas, I stopped at a local Walmart, gave the lady at the desk $21 (There was a $1 fee for the card) and that was it!  I had a card number.  She said I could use it "just like cash....but even better!"  I asked if she needed my name or anything like that and she said "nope....it's just like cash!"  Here's the fee schedule for this great "just like cash" product.  I snapped a picture (with my awesome Chinese phone) right off of the Customer Service Desk "menu board".



Now, I'm not one to quibble, but I would have to disagree with the nice little old Texas lady who sold me that Walmart MoneyCard.  She's dead wrong.  It's even BETTER than Cash!  If I have a duffel bag full of cash and I want to get over the border, I can't immediately transfer it anonymously to over 200 countries.....But I absolutely can with the Walmart/MoneyGram tool.  All I need is two fake identities, one on each end of the transaction.  (No wonder there's such a HUGE market for fake names, addresses, DOB's, SSN's, Addresses, etc.)   Again, not to appear judgey, but as I walked around the West/Central Texas Walmart, trying to inconspicuously fit in with the Good Ol' Boy/Girl Walmart customers (I was wearing my Stetson as a covert disguise, attempting to remain inconspicuous and saying "howdy" randomly to passers by), I couldn't help but wonder where all of the demand was coming from for all of this international money transfer business (Starting at $4.75 per transaction ).  So I decided to continue my research on-line.

I was really shocked when I saw the Walmart/MoneyGram "Location Finder".  As a West/Central Texas Walmart Customer I could transfer money to, for example, Mexico where any fake compadre', pal or buddy can show up at one of the thousands of locations, in any one of the 200 countries and pick up their cash.   Even more amazing is that if I am a "good old boy" in Texas and all my friends are in China (These relationships, I'm sure, are very common), I can transfer Greenbacks, Euros, Pounds and Aussie dollars to oodles of locations in Beijing (70 locations), Shanghai (90 locations) or just about any major Chinese City, all sponsored by the major Chinese banks (BOC, CITC, ICBC, etc.).

Even stranger, I can't transact business in RMB in West/Central Texas?  I can only use Greenbacks, Euros, Aussie or English money?  How in the name of Sam Austin is a Cowboy at a Texas Walmart supposed to do business on mainland China?  What are all of those citizens in China going to do with the foreign currency I sent them?  I'm sure that there's some conversion magic that happens on the back-end so these recipients of FOREX somehow get paid.

Here's the screen shot of the "Location Finder".....go ahead, give it a try, if you are a rootin' tootin' Cowboy who's just itchin' to send some Greenbacks to your friends in Guangzhou this tool is for you!


   

I wanted to test this out so I logged the card in under my wife's name (I told her I was doing this so she wasn't surprised if she somehow found out about it.  Author's Marital Tip:  You should always tell your spouse if you are applying for credit in her name.) I went on-line, registered the card (they did ask me for her SSN for security....this might explain the active market for SSN's and "Fullz" available for sale on the Internet

Anyway, it was easy, I had a re-loadable cash card in her name!  I was immediately sent marketing emails from Walmart.com... "You can use your temporary card to shop at Walmart!"  "You can sign up for automatic deposit!".  Isn't that AWESOME!  




The great thing about the Walmart MoneyCard, according to their card agreement, is that you can transact up to $2,999 dollars A DAY in transactions at ANY Walmart.  Theoretically, you can run up to $1,094,635 ($2,999 x 365) cash-in/cash-out transactions per year on a single Walmart MoneyCard by using any of their convenient locations......and there's NO LIMIT to the number of cards you can have!  You (or someone pretending to be you) can just provide the cash and/or other payment at any convenient location and you are in business.   Author's notes: 1.) I'm hoping that this level of activity ($3,000 a day, every day) might generate a red flag or two, but based on my interaction with the presumably highly trained, AML (Anti Money Laundering) sleuths at the Walmart I visited, I have my doubts. I gave them the money and they took it.  2.) Again, I don't want to appear "judgey" but based solely on the appearance of the good, simple, hard working, blue collar folks I see shopping at Walmart, I'm a little confused as to why they might need a $3,000 a day limit on their "no-credit-check-high-fee-re-loadable" MoneyCards.

The MoneyCard is issued by GreenDot Financial (NYSE:GDOT) and according to their Investor Presentation....

"They Are Everywhere!"  100,000 "Nationwide Brick & Mortar Account Acquisition and Reload locations!"



Green Dot Corporation is headquartered in Pasadena, California, with additional facilities throughout the United States and Shanghai, China.  The Company was founded in 1999 and went public in 2010 (NYSE: GDOT) I guess I might ask, why does a company that solely plays in the US "No Credit Check high-fee/re-loadable/debit Cash Card" business need to have their sole, non-US office strategically located in Shanghai?  I'm sure there's a really good reason for this, but like I've said many times, often "good" reasons, can result from pretty bad motivations.

Per the last 10-K: "Our gross dollar volume was $31.8 billion" (Total funds run through the cards) - pg 34.   This volume is up from $5.8 Billion in 2009.


https://www.sec.gov/Archives/edgar/data/1386278/000138627818000013/form10-kxgdot12312017.htm

Besides the relatively huge $2,999 daily transaction limit, there are other excellent benefits that are automatically included with the Walmart MoneyCard as described in the GreenDot Card Issuer Agreement.  Feel free to read this bad boy if you like horror stories.  It is apparent that anyone who uses this card (for legitimate purposes) likely has nowhere else to turn.  On the other hand, people who are using it for illegitimate purposes (drugs, gambling, human trafficking and general all-purpose money laundering, etc.)  really don't care all that much about the cost of doing business.  Their margins are usually pretty good.....

Advantages of the Walmart MoneyCard:  

1.) The fees are slightly less than what a Pay Day Lender or traditional Loan Shark would charge to hold and process your money......and as an added bonus, your kneecaps presumably remain un-threatened and intact!

2.) The card only charges a 3% "Foreign transaction fee"!  Again, not to appear judgey, but when I go to Walmart I rarely say to myself "Hey....look at all of the jet setters and world travelers!"

3.) No mailed statements!  That's right Walmart/GreenDot does NOT mail out paper statements.  It's a huge cost savings for them...and especially handy if the cardholder accidentally happens to be using someone else's identity!  The "accidental" MoneyCard holder is never aware that someone opened an account for them by mistake since there's no statement and no credit check!  This saves GreenDot/Walmart a ton of time, paperwork and money.  It's always a hassle to straighten out those little "wrong name on the card" mix ups.  

Author's Note:  I told my wife I was opening a MoneyCard in her name, but for all of you disgruntled, money laundering spouses out there, apparently you don't have to tell your spouse about their new card.  Walmart doesn't care at all if you are a large German guy using a card with the name of an extremely attractive Indian woman on it!  If I hadn't mentioned it to her prior to my putting the card in her name, I have no idea how she would have found out until, perhaps she got a "permanent" Walmart MoneyCard with her name on it in the mail, but the envelope that the card comes in looks so much like the dozens of credit card offers we get every week, that she might have just tossed it without even opening the envelope.

4.) There is also a strict warning that the MoneyCard can under no circumstances be used for(i) unlawful domestic or international gambling web sites, or at payment processors supporting unlawful gambling web sites, or to purchase illegal goods or services (i.e. "hookers & blow").  Authors Note: Generally, when we see the obligatory "You can't do that!" caveat on a financial agreement with criminals, it doesn't deter the activity, but it absolves the facilitating party from liability.  "See ....we told them that they can't buy hookers & blow with the MoneyCard and they did it anyway!....not our fault!"  I also always like to see the public service "Gambling problem?...call 1-800-BAD-LUCK" notices hidden away in Casinos.  "See....we told them they had a problem...and they ignored the signs!"  Very comforting.  I guess the rationale is, if you win, you don't have a gambling problem?  

I'm also guessing that the Walmart MoneyCard cardholder agreement was written by former Wells Fargo executives.  "See ....it's right here....on page 47....we told you that you were buying insurance from us!  We didn't do anything wrong!"

5.) You may withdraw up to $400 from an ATM and $1,000 from a Walmart register in a single day and $1,500 per teller transaction, unless otherwise indicated.   Again, trying again not to be judgey, but that's a lot of money when your unemployment check is $600 a month.

6.) The agreement clearly states: "You cannot sell or transfer your Card to anyone else, and it can only be used by you or someone you authorize.  If you authorize anyone else to use your Card, you are responsible for all transactions made by that person.Translation: "Anyone can use the card...it's just like cash!"

7.) The agreement clearly says:  "You agree not to use or allow others to use an expired, revoked, cancelled, suspended or otherwise invalid Card. We reserve the right to limit or block the use of the Card in foreign countries due to fraud or security concerns or to comply with applicable law"Translation: "Give it a try!  Our systems aren't tight enough to prevent you from using invalid cards in foreign countries."

8.) Finally, as an aside, there's a reason my business spam box gets dozens of emails like this (actual example below) every week:

"There is a simple way that you can make more money now with just a Blank ATM card, all that you need to do is to contact this email: PhantomGhostxxxxxx@gmail.com they also offer other types of geek services."

Amazon Cash

Never late to the party, we can expect Amazon to be a major force and equally ubiquitous in the "No Credit Check Re-loadable Debit Card" money laundering game post-haste.  Last year they began pushing their own, no ID required, Amazon Cash card, available at tens of thousands of 7-11's, Speedway's, Game Stops, etc.   




Actually, you don't even need a "name" to do this.  Just hand some money to the 7-11 clerk (who is of course a highly trained money laundering specialist) and you've got a bar code on your burner phone!  You're ready to send a MoneyGram to Tijuana, or buy a $250 bag of potting soil from your Chinese friends!

Even more surprisingly, presumably because of the enthusiastic acceptance of the Amazon Cash money laundering program here in the States, two months ago Amazon announced that it will be launching the Amazon Cash high-fee-reloadable-money-laundering card program in their first overseas market......drum roll please........MEXICO!

Choosing Mexico as the first overseas market for a no credit check, no ID required money laundering program makes perfect sense.  Why in the world would you select the EU, Canada, Japan, or other developed countries where people already shop on your website and already have established ID's?  Moreover, you'd have to compete in a market already saturated with credit/debit cards owned by customers who already have a credit score, legal sources of income and money in a bank.  What value could Amazon possibly add to markets like this?  On the other hand, Mexico, a country where 2/3rds of the population don't have credit/debit cards or bank accounts and Mexican nationals routinely need to get money reliably back and forth across the US border anonymously, for a number of very important reasons.  The program is sure to be a welcome, instant, low risk, low cost replacement for all of those unreliable "couriers" with cash stuffed in their underwear being used now.  Once again, Amazon and Walmart have recognized an enormous opportunity in an under-served market.  This program should be taking off like gang busters! 

Based on market potential, I would imagine that Iran and Afghanistan are next up on the Amazon/Walmart "no-ID-required-money-laundering-card" roll out list, just as soon as they are removed from the State Depratment's OFAC "Countries you Can't do Business With" list.  I'm sure the lobbyists are working on opening up new, lucrative markets as I type.

Anyway, based solely on the networks being developed, it's clear to me that Amazon and Walmart are well on their way to becoming the world's premier facilitators to the creation of a subterranean network of untraceable, electronic funding sources.....if they aren't already. 


The Vancouver Model

Executive Summary: The Chinese government is actively involved, and may be the primary driver in the synthetic Opioid plague running amok in the US and Canada.  We discuss the scope of the problem (roughly 55,000 est. US overdose deaths in 2017) and the work of Professor John Langdale regarding his work on what he refers to as the Vancouver Model for laundering Chinese drug money.  We locate actual websites where we can purchase synthetic Opioids on-line from China mailed directly to American and Canadian addicts.  

The next Executive Summary is:  "Oh My God.....What Have We Done?

The other day, a good friend and customer of mine, who I'll refer to as "Fred" to preserve his anonymity, gave me a call about some changes to his insurance policies.  I hadn't talked to Fred in about a year.  My bad for not keeping up with him, he's a great guy and good friend, but, you know how it goes, we just get busy and the calls we should make and the things that should matter somehow get pushed aside.

Anyway, when I asked Fred how things were going, he stammered and paused for a few seconds, choked up a bit and then he told me a story.

Apparently, Fred's oldest son become addicted to opioids.  According to Fred, nobody knew about his son's problems.  He was employed on a construction crew, never missed a day of work, was married to a wonderful young woman and had a beautiful four year old son.  By all accounts, he was a happy young man.  Last fall Fred found his son early one morning in his basement bathroom slumped over the toilet, unresponsive.  He was 29 years old.  Later it was determined that he had overdosed on one of the many home-made versions of Fentanyl available on the streets of small town America.  The police told Fred that there was a significant variation in the potency of these drugs and his son probably injected a product that was  much stronger than his usual supply.  He paused again for a moment.  He told me that the hardest thing that he ever had to do was to bury his son.

I'm going to take a break from writing now and come back to this in an hour or two.  Rated on a  sorrow-per-syllable basis, that was a really hard paragraph to write.
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Ok....I'm back now.  I think I owe it to Fred to describe exactly why this happened, and the forces in place which caused my good friend Fred to lose his son.

Right now, according to the CDC, Opioid overdoses are increasing dramatically, overdoses have increased 30% over the last year, with a 70% increase in the Midwest.  Opioid deaths have generally mirrored the overdose statistics.  Opioid availability, both prescription and illicit, are, of course, the main driver of drug overdose deaths.  In 2016, opioids were involved in 42,249 deaths.

If we extrapolate a 30% growth rate we can presume that the 2017 death toll will come in at roughly 55,000 for 2017 and will rise to more than 70,000 this year.  To put that number in perspective, it's about twice the number of US traffic accident deaths.  A better visualization might be that we lose one (1) NFL Stadium full of citizens every year to opioid overdoses.  If the opioid crisis hasn't personally impacted you yet, I assure you it will.   
 
Interestingly, one of my Canadian readers, after digesting my last post, (The new phone book's here!) on the enormous effort the Chinese Government has put into converting "hot off the press" RMB into hard Western assets at a huge, disguised discount, forwarded a couple of items to me based on the excellent work of Professor John Langdale.  John is a professor of  International Security Studies at Macquarie University in Sydney Australia.  His work is summarized by what he refers to as the "Vancouver Model".  In a nutshell, he describes and documents how Chinese criminal gangs are using Hong Kong financial institutions, Vancouver Casinos and willing bankers to launder transnational criminal money, eventually converting it to Vancouver Real Estate, or round tripping "boomerang" Western Assets, as I described in my last post, to offshore financial havens.

Here's a simple, quick video link describing the problem and how the Vancouver Model works:
https://globalnews.ca/video/4150897/what-is-the-vancouver-model

In the interview below, British Columbia AG, David Eby comments on the crisis resulting from the Vancouver Model.
https://globalnews.ca/video/4156272/extended-how-transnational-crime-groups-target-canada/

I've been trying, through John and a few other contacts to get some idea of the magnitude of the dollars/assets involved in this deadly scheme, to no avail.  On the other hand, it's not surprising,  Criminal enterprises don't generally file financial statements, advertise their success and are less than forthcoming about cash flow.  There are anecdotal tales describing duffel bags of drug money showing up in Vancouver casinos and skyrocketing condo prices, all paid for by Chinese cash.  Although it's difficult to determine exactly how much money is being laundered and pundits would argue that it's insignificant in the grand scheme of things, I'd suggest that Fred, along with the parents of the tens of thousands of unfortunate people like his late son, think that this is a bigger problem than we can imagine. 

In America's Midwest, specifically in Ohio, this has become a nightmare.  Actually, Cincinnati has become ground zero.  A few clicks on a Google search yields lots of local, China based sellers, willing to accept PayPal, Credit Cards, Amazon Cash or even a Walmart MoneyCard/MoneyGram as payment.  Let me make this crystal-meth clear.....there are hundreds of websites like this out there, maybe thousands, this one jumped out based solely on the audacious content and the sites very existence.  It's been going strong since 2015 and apparently US Authorities are either unaware of it, or are unable to shut it down.

http://www.theresearchchemicals.com/

(I've not put a link on the above.  Your AV Software should/will tell you that this is a HIGH RISK site.  Proceed at your own peril.  I access these things on what I call a "throw away" PC, disconnected from my networks, for obvious reasons.)   


The pricing is very reasonable, usually $50 or so for a couple of fixes.  There are all sorts of synthetic Cannabinoids, Opioids, Fentanyl and Carfentanil derivatives all ready to be packed and shipped, available on the site.  It's the eCommerce version of Breaking Bad.




















(Please Note: I didn't actually purchase anything since I prefer that the DEA doesn't come knocking on my door.....I didn't want to be "that guy" trying to explain that the illegal Fentanyl being shipped to my office disguised as printer ink cartridges was actually for a blog post.....)

When we read through the "About Us" tab, it is, as expected, littered with typos and grammatical errors.   Exactly the attention to detail that I'd want if I were purchasing potentially toxic "Research Chemicals".  Fully understandable, the CVS and Walgreen's websites are a mess too....those wacky Pharmacists!

This site is so absurd that at first glance, I began to think (and hope) that maybe it was a DEA bait site....but after further review, I concluded that the DEA would have done a more believable job with the content.

There's also a currency converter (on nearly every page) and a whole list of acceptable payment methods.  They, of course, accept MoneyGram payments from your local Walmart, Wire Transfers, Western Union, Hong Kong Post payments as well as BitCoin!  TheResearchChemicals.com is truly on the cutting edge of global-block-chain technology.  Oddly enough, they don't accept RMB....



There are also privacy policy statements purportedly protecting your rights as a chemical consumer splattered all over the site.  If this wasn't so tragic, it would be stunningly hilarious.

The "About Us" tab also provides all sorts of info about the company, except, of course, an address.  They guarantee speedy delivery all over the planet, as well as the highest of quality, but they also mention that if there are any "Customs" or import/export issues.....you are on your own.

Here's the intro on the "About Us" tab.....it sort of flies in the face of their "Get High Legally" Home Page Banner ....the "we're here to serve you" tone gets even sillier from there:

Welcome to ResearchChemicals, the best research chemicals shop to stock up on advanced materials for your experiments. You need someone you can trust when it comes to delivering 100% legitimate, absolutely pure chemicals and with us you can be absolutely certain in this regard. Our dedication to quality and scientific integrity has made us one of the most respected suppliers in the online market, a reputation we take very seriously and work hard to maintain.

Also of interest is their liberal return policy.....if you are not satisfied, you can't ship the product back.....but they will just replace it for free!

Returns
Due to the nature of the products we sell, we are unable to accept returns. Any defective, damaged or incorrect orders shipped will be replaced or refunded, if we are notified within 7 days of receiving your order and it is reasonable to do so.

Apparently, "TheResearchChemicals.com" website was established in 2015 in the UK  anonymously through PDR, a "Godaddy" like service provider.  So they've been "breaking bad" for about three years now.  Requests to PDR (PublicDomainRegistry.com) for where this website is hosted and the address of the real owners went unanswered.  Any bets that it's run out of Guangdong China?




















To sum this up, I've posted a few more interesting sources on the US Version of the "Vancouver Model" phenomenon below. 

"Purchase Chinese Opiods On-Line" - NBC News "How to Video" a producer's email conversation with a Chinese lab and the associated sales pitch, pricing and Q&A.
https://www.nbcnews.com/storyline/americas-heroin-epidemic/fentanyl-crisis-deadly-drug-easily-available-online-purchase-n791311

The Science of Opioid Derivatives and how Chinese Labs make and ship the products to the US
http://www.sciencemag.org/news/2017/03/underground-labs-china-are-devising-potent-new-opiates-faster-authorities-can-respond   

New York Times - The flood of China's pharmacological "technology" into the United States.
https://www.nytimes.com/2018/04/04/opinion/carfentanil-fentanyl-opioid-crisis.html

Council on Foreign Relations - Graphics/Stats on the Opioid Epidemic
https://www.cfr.org/backgrounder/us-opioid-epidemic

China's stance on the US Opioid Epidemic - "Not our Problem"

"While we don't deny that some fentanyl substances abused in the US have come from China, we don't see sufficient evidence ... that most of them have come from China," said Wei Xiaojun, deputy secretary-general of National Narcotics Control Commission, China's top drug enforcement agency.

https://www.cnn.com/2017/11/03/health/china-drugs-fentanyl-trump/index.html 

As per the usual game plan, rather than extending a helping hand, in the spirit of International cooperation, the CCP stance has been to deny China's involvement.  Apparently, according to the CCP the roughly 2 million US addicts and this years 70,000 (projected) dead Americans have to do more with the erosion of Western values.  Their position is that Chinese involvement, if any, is insignificant. 

From high altitude, anyone who has been an observer of, or subjected to Chinese government, policy and operation understands that nothing in China happens without direct CCP approval.  When the Chinese government wants to make something happen, it happens.  Moreover, if they want to stop something from happening, they are not bothered with silly Western concepts like civil, human and property rights and/or due process.  If the Chinese government decides that it doesn't like what a few of its citizens are doing, they pick them up and either the rogue citizens step in line or they disappear.  That said, it's fantasy to believe or even suggest that the Triad/gang operation as described above, and the Opioid scourge being perpetrated on the US population through ubiquitous Chinese websites, easy payment methods, untraceable fake ID's and systemically designed money laundering, is simply an out of control, rogue criminal enterprise somehow undetected by Chinese authorities.  For God's sake....the Chinese people can't even see my goofy little blog!  It's no secret that my work is often openly critical of Chinese business and policy.  The Chinese government controls everything, knows my blog exists and they ban it?  You can only access my blog on the mainland through an un-monitored VPN?  I get tens of thousands of page views every month, from all over the world and not one from the Chinese Mainland?  My silly little blog is relentlessly blocked by the CCP, but TheResearchChemicals.com website and thousands of others are running full blast 24x7 with pick-ship operations right under the nose of the CCP?  And they know nothing about it?  Really?

If the Chinese wanted to stop it, they would stop it.  As is SOP with the CCP, they would send their police and/or military into Guangdong or wherever the trail leads them, make arrests and lock up the suspects, like they do for just about everything else that runs contra to party interests.  They would shut down websites, beat people until they ratted out their cohorts and hunt the cohorts down like the dogs they are presumed to be. (Again, to expedite the process, no trial or lawyers needed.)

More likely, similar to the dual-currency, monopoly money, "boomerang" conversion described in my last post, the rampant-run-amok purchases of US and EU hard assets with same; and the "Made in China" Walmart/Amazon/Chinese sweat-shop supply chain laying waste to middle America as described herein; the Vancouver/Cincinnati Model is, for all I can see, yet another brilliantly designed piece of Chinese International policy intended to destabilize and destroy the Western way of life while simultaneously bringing hard assets under Chinese control at bargain prices.

Through its policy, the Chinese government started a war on the Western civilization twenty years ago.  They are about to win it without firing a shot.

The CCP is diabolically brilliant.


Oh My God....What Have We Done?

Executive Summary:  Economists (Brookings, et al) and financiers (Dalio, et al) are generally in agreement that we have a significant problem developing re: income inequality, workforce participation and the erosion of the American Middle Class.  We reference work by Ray Dalio and a recent panel discussion at Brookings, as well as a couple of other relevant sources.  We describe the bullet points of these references.  In summary, everyone cited, America's best and brightest, have not yet recognized, as described above, that China's foreign and monetary policy, and America's failure to properly react, are the root cause of the decline and if left unchecked, destruction of America's Middle Class.  

The next Executive Summary is: "The Art of the Bad Deal".


Last fall Ray Dalio wrote a timely little piece on LinkedIn chock full of all sorts of depressing findings delivered and described in a much less personal, and from my humble point of view, less entertaining format than I've described above.  (Billionaires, though brilliant, can be a little dry...)  I encourage you to read Ray's thoughts, but since I understand your time constraints, specifically, since you've spent so much time reading this blog, I've posted the highlights of Ray's work as follows:

1.) There are two Americas, the bottom 60 % and the top 40%

2.) We have massive income inequality.  Unlike nearly any time in history.  For example: The wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period. 

3.) Real incomes have been flat to down slightly for the average household in the bottom 60% since 1980 (while they have been up significantly for the top 40%).

4.) Only about a third of the bottom 60% saves any of its income (in cash or financial assets). As a result, according to a recent Federal Reserve study, most people in this group would struggle to raise $400 in an emergency.

5.) Retirement savings for the bottom 60% are not even close to adequate and aren’t much improved as the economy and markets have recovered.

6.) Addressing "Quality of Life" in a quantitative way, Ray points out that: Death rates are rising and mental and physical health is deteriorating for those in the bottom 60%. For those in the bottom 60%, premature deaths are up by about 20% since 2000. The biggest contributors to that change are an increase in deaths by drugs/poisoning (up two times since 2000) and an increase in suicides (up over 50% since 2000). The odds of premature death for those in the bottom 60% between the ages of 35 and 64 are more than two times higher, compared to those in the top 40%.  The US is just about the only major industrialized country with flat/slightly rising death rates.  There is significant adverse correlation across other social metrics.  Divorce rates, education, political polarity and "happiness" surveys all point to additional pressures on America's Middel Class.

7.) Ray concludes, as is reasonable, that the FED may be led to make significant policy mistakes if it doesn't focus on the "Two Economies" i.e.) The Buffett adage that statistics can be misleading, if you have one foot in a bucket of hot coals and the other in a bucket of ice.....on "average" you are far from comfortable!

From my perspective, Ray is really, really close to "getting it".  Again, US Monetary, fiscal and foreign policy (Not just the FED) must be completely reconstructed to counter what the CCP has accomplished. 

Steve Brill..."Tail Spin"

Steve Brill in a Time Magazine piece (Yes....magazines still exist....who knew?) blames the Baby Boomers (i.e. me and all my friends) for the inequalities that exist today.  I guess I can't totally disagree.  Steve's thesis is that beginning 50 years ago, we, smart industrious Americans began to use the 1st Amendment to put our "thumbs on the scale", tilting the playing field in our favor and using the American political system to our advantage, continually taking a bigger slice of the pie.

Again, I would not disagree.  This is exactly what market driven, entrepreneurs do.  We push the limits, look for strategic advantages and execute our Master Plans, increasing our wealth geometrically, often at someone elses expense.  Capitalism can sometimes be a cruel master.  On the other hand, Steve fails to address the prospect that many of our Master Plans were "Made in China".  This little nugget of insight might have an impact on his perspective.

The Brookings Institute - The Middle Class and the Economy

Following the direction of Ray's and Steve's line of thought, last week there was an excellent panel discussion on the future of the middle class sponsored by Brookings.  I'd encourage you to watch the video.  These folks are the best and brightest economic minds in the country.  Unlike Facebook and Twitter, Brookings generally avoids putting uncredentialed schmucks on stage.

Again, these are really important concepts, bantered about by really smart people, but I'd also caution you that the two (2) plus hour video clip, unless you have a PhD in Economics, is a bit painful to watch and even harder to understand. 
https://www.c-span.org/video/?445222-2/middle-class-economy

That said, in the interest of time, let me break it down for you.  I'll take a minute to summarize the bullet points:

1.) There are significant rising inequalities/gaps in wages between classes of citizens.
2.) Workforce participation is declining.  The "American Dream" of a rising middle class life is becoming more elusive.
3.) There are concerns about the level of labor participation by classes of citizens.  e.g..) older workers are working more and younger, less educated workers are working less.
4.) We have very little accurate, reliable data regarding employment in a rapidly evolving economy.
5.) The decline in "Prime Age Workers" accounts for 80% of the decline in the workforce participation rate.
6.) Economic mobility, pulling yourself up by your bootstraps (The "American Dream") is on the wane.
7.) Automation and Import Competition are the primary drivers of the decline in Workforce participation.
8.) We've failed to respond to global trends.  Workforce participation and the related inequalities are caused by Policy choices and are theoretically reversible.

Unfortunately, my "Elephant in the Room" work in this Blog was brought up only in the periphery.  China was mentioned a few times, but only in the context of competitive job loss.  Monetary policy and the RMB was not discussed.  Opiods and addiction were mentioned as a growing concern relating to employ-ability statistics.  None of the panelists pointed the finger at Amazon and Walmart as the Angels of Middle Class Death relentlessly subsidized by government policy, the Chinese supply chain and ruthless Capital Formation.   

In the panelist's (Heidi, Michael, Ben & Melissa) one minute, "What's the one thing you would do to level the playing field and fix the US labor market?" lightening round closing comments, lots of ideas like, ""Boost Unionization", "Expand Earned Income Subsidies", "Sectoral Bargaining", "Wage Boards" and "Skill Upgrade and Training Program Investments" were thrown on the table.  Although interesting, these would have virtually no impact on the grand scheme of things.   In the panelists defense, it would have been out of context to propose, at the end of the discussion, coming completely out of left-field: 1.) Higher interest rates, increasing capital cost; 2.) US/Global Monetary Policy Reform re: the RMB; and 3.) A Chinese Trade Embargo as possible solutions to the problem.

My sense is that all of these really smart folks understand the problem, but they've not yet connected the dots.  The panelists have generally agreed that the above bullets are a byproduct of US Economic Policy, which is true.  But they've not yet understood that the failures of  US Domestic policy are further driven by our failure to properly react to Chinese economic, monetary and foreign policy.  I, for one, hope they get there soon.

Our Dysfunctional "Evil" E-Society

David Brooks, in a New York Times Op-Ed does a nice job of describing how Americans view "big tech":

"There are three main critiques of big tech" David writes:

"The first is that it is destroying the young. Social media promises an end to loneliness but actually produces an increase in solitude and an intense awareness of social exclusion. Texting and other technologies give you more control over your social interactions but also lead to thinner interactions and less real engagement with the world. As Jean Twenge has demonstrated in book and essay, since the spread of the smart phone, teens are much less likely to hang out with friends, they are less likely to date, they are less likely to work."

"The second critique of the tech industry is that it is causing this addiction on purpose, to make money. Tech companies understand what causes dopamine surges in the brain and they lace their products with hijacking techniques that lure us in and create compulsion loops."

"The third critique is that Apple, Amazon, Google and Facebook are near monopolies that use their market power to invade the private lives of their users and impose unfair conditions on content creators and smaller competitors."

David closes with the query:  "Imagine if instead of claiming to offer us the best things in life, tech merely saw itself as providing efficiency devices. Its innovations can save us time on lower-level tasks so we can get offline and there experience the best things in life."

In a semi-unrelated New York Times article, Sabrina Tavernise wrote in 2016 that the U.S. Suicide Rate had surged to a 30-Year High.  Although the 2017 numbers are not yet available, I'd imagine that the trend has accelerated.  In general terms, 70% of all suicides are white men, but the suicide rate jumped for all classes.  The suicide rate for middle-aged women, ages 45 to 64, jumped by 63 percent over the period of the study, while it rose by 43 percent for men in that age range, the sharpest increase for males of any age. The overall suicide rate rose by 24 percent from 1999 to 2014, according to the National Center for Health Statistics.

Correct me if I'm wrong, but wasn't Facebook launched in 2004?  Is it a coincidence that suicide rates are increasing in the midst of all of this disconnectedness, e-Confusion and dot.com self-deactualization?

If you are in your 40's, and you were an early adopter, you've been subjected to Facebook, Google, Amazon, etc. and the wonders of Internet targeted advertising and opinion manipulation your entire adult life.  According to Ray, Brookings, Steve and David above, you might have a hard time finding a job, you've probably got some health problems, no insurance or savings and are one bad break or two (a $400 unexpected bill?) away from being homeless.  Your addicted kids are saddled with huge college debt, if they went to college at all.  Your credit has been crippled because of the aforementioned..... and you log in to Facebook and see all of the people who used to be your friends and high school classmates posting puffed up bullshit about how great their life is.... you get depressed and feelings of inadequacy consume you.  Sadly, in America, after a particularly bad day, it's really easy to buy some liquor and a hand gun.....and after another (and your last) bad decision, in an instant you've become a data point in an accelerating statistical socio-economic tragedy, to be discussed by economists, government officials, billionaires and bloggers.

So here's my thesis (to be tested over time):

The Internet, along with so many of our addictive "freedoms", is hazardous to the nation's mental health.....



Facebook, Amazon, Google, etc...like drugs, cars, liquor and firearms......must be used responsibly.....I'm waiting for an NFA (National Facebook Association) to form....upholding the rights of depressed, friendless, mentally ill Americans to use Facebook......you can take my Facebook when you pry it from my cold dead  hand.....tragic.


What to Do?

Well, for starters, we could eliminate the moral hazard of near-ZIRP Interest rates which causes capital to be deployed in unlikely and non-productive ways, without regard to earnings and profits.  As a society, we've come to believe that the promise of future profits at some point in the distant future is actually much more important than current results.  The guy who owns the local hardware store has to turn an immediate profit and feed his family and pay his bills, where the multinational eCommerce giant, or State Owned Enterprise (SOE) by virtue of a seemingly never ending stream of "free" capital can wait it out.  Slashing prices in the short term either through a subsidized, on-line presence or by dropping a "Big-Box Proton Bomb" (the people are still there but the businesses are gone) on on a small town, does nobody any good.

In the end "fly-over America" will be a wasteland, dotted with vacant Walmarts and other empty buildings as fleets of drones and driver-less vehicles deliver our underwear and socks, Budweiser extract and legalized synthetic Fentanyl to our double-wides, paid for by our Universal Income allowance, which our rich Uncle Sam deposits on our Reloadable Walmart MoneyCards and Amazon Cash Cards. (Walmart and Amazon will be "Fly Over America's" one and only source of funding since all of the small town banks and their employees will also cease to exist.)  Yup....in America's Heartland "people" will have become obsolete.

As leaders, we need to have vision as to what the future holds in store.  We need to stop giving people the incentive and "freedom" to do incredibly stupid things.  Being in the insurance business, I see things happen every day, that can best be described as "wrong place wrong time".  These events almost always involve someone's bad judgment, yet they impact everyone.  People believe that they have the "freedom" to drive at 90 miles per hour, or build a tree house for two kids, with an amazing panoramic view, and leave it unattended when there are a dozen kids in the the neighborhood clamoring to get up there.  They might think that deep frying a Thanksgiving turkey in their garage (It was cold outside!) right next to their leaky old gasoline can was a stroke of genius.  Why wear seat belts, install smoke detectors or upgrade that fuse box?  The "man" has no right to tell me what to do.  Hey....do you smell smoke?  Authors Note: These are not "stupid" people.  They are (or in some cases were), educated, smart, talented people who just didn't think things through.  "Good Judgment" doesn't grow on trees and apparently isn't taught in school anymore, or possibly anywhere...ever.  In America we reject any authority telling us what to do, no matter how good the "advice" (aka Regulation) is.  We absolutely loathe regulation if it cuts into our bottom line.  We relish and celebrate our "freedom" to make incredibly bad, or in some cases, horrible judgments.  It's in our DNA.  "That's what insurance is for!"  Unfortunately, there is a cost associated with these errors that we rarely take into account when we were coming up with our plans.  It always "seemed like a good idea at the time".....

In America we have the inalienable right to "shoot and get shot" and apparently, do whatever the hell we want at the expense of others.   As leadership, in a caring society we should be much more focused on protecting people (or "Regulating" them....there's that dirty word again..) from other's (or their own) folly rather than providing them with an unlimited opportunity, incentive and "freedom" to make the wrong choices so we (or someone funding our campaign) can scam these freedom loving knuckleheads out of their life savings and any hope for their future.

The battle cry is always a derivative of "It's what the people want!"  Agreed, there is a huge demand for drugs, guns, gambling, prostitution, porn, liquor, tobacco, "free" money, low interest rates, etc.  I have to admit, I take an aspirin once in a while, appreciate low interest rates, enjoy trap shooting, a monthly poker game and a nice scotch and a cigar on occasion.  On the other hand, call me a prude, but I have no desire to spend hours at a casino (I can do math and calculate the tiny probability of winning), snorting crack, with an AK-47 on one knee and a hooker on the other, plopping down my high-fee-reloadable Walmart MoneyCard to pay for it, no matter how good the scotch and cigars are.  That just doesn't seem like all that much fun to me.

We all need to look in the mirror....we have to admit, as a society we are not capable of seeing what's happening.  We continually vote for schmucks who rant about saving the middle class, small business and American jobs through deregulation, trickle down tax cuts and unleashing the power of the American worker.  They rile us up and blame the Mexicans, the Chinese, the Muslims, and any group that strikes fear into their constituents, all the while bellying up to the trough, accepting truckloads of dark money from God knows who in order to perpetuate their version (not yours) of the American Dream.

So, over the last few decades, here's what we've given the youth of America as a result of our inability to understand or react to China's "Master Plan":

We've saddled them with gigantic college debt, and/or taken away most of the jobs and hope, and provided them with unlimited access to addictive, self-destructive social media, littered with tools which buttress our overwhelming feelings of inadequacy, "how to" cool, killing-fields video games and movies, opioids, tequila and easily modifiable, semi-automatic assault weapons all available with a couple of mouse clicks,  I guess when I say it like that, it doesn't sound like the best Master Plan we could have come up with.

If you are still in doubt about everything I've written thus far, I'd ask you:

What's more believable?:

A,) That a struggling Seattle bookseller, the product of a cross country road trip by a quirky engineer; and a tiny Arkansas discount store run by a few good old boys from Bentonville, fearlessly, out of the blue, took their businesses to heretofore unforeseen, unimaginable heights, developing global supply chains with foreign  suppliers (specifically China) that were unduplicable by every other retailer in America, creating the most dominant, and as we've seen, destructive, locust-like businesses the world has ever known....

OR:

B.) Jeff, Sam and company had significant help from some really smart people in the Chinese government.  Could it be possible that the CCP hand picked these two silly little businesses to run point on the evisceration of Heartland American Retail and the related communities, priming the pump for decades of US Trade deficits and the destruction of tens of trillions of dollars of competing business and related US Commercial Real Estate value?  Is it possible that the Chinese government gave Amazon and Walmart, blessed, preferential treatment, coaching and assistance on how to navigate the Chinese supply chain better and more efficiently than their competition, to the detriment of every other American retailer?  Might it be that Beijing knew full well that, because of their managed currency and supply chain, that once fake/illegal Chinese goods, laundered money and opioids became ubiquitous on US Websites it would only be a matter of time before the US Economy would be irreparably harmed?  Have the Chinese elite implemented a stealth, retaliatory version of the 19th Century Opium Wars in a "turn about is fair play" move, accelerating their drive to become a dominant world power?  Is it possible that the destruction of small town America was brilliantly planned long ago in Beijing and our leadership still hasn't figured it out?

Again, the Chinese people I know are brilliant, competitive, talented people.  They know what they are doing.  Coming up with a covert plan to systematically wreck the US Economy wouldn't be beyond their capability nor out of the realm of possibility.

Phone rings.....circa 1999.....

Mr. Glass (Sam's successor)?  Mr. Bezos?.....I have Beijing holding on line #1....and Wall Street on line #2....will you take the calls?


The "Art of the Bad Deal"

Executive Summary:  In this section we discuss how the American Middle Class and by extension, the US Economy is actually "in check" and a few errant moves away from "Checkmate".  We discuss the CCP mastery of their understanding of our political system, as well as a hypothetical "Bad Deal" which illustrates how few good choices (and the long list of bad ones) that our Administration has left to make.  The conclusion is, because of our handcuffed political system, that nothing meaningful will happen.  No consensus can be achieved and no corrective measures will be taken.   We will continue our gradual, inevitable slide into the abyss, guided every step of the way by the Chinese Communist Party.  

The next Executive Summary is:  The 34th Amendment...     

In Chess terminology, the US Economy is in "check" and just a few bad moves away from "mate".

I'm far from a Chess Master (My mind isn't quick enough.  I'm not wired to respond immediately...to anything.... and I prefer to ponder and ruminate on concepts until I stumble upon what I believe to be plausible moves and outcomes....but I digress).

Anyway, any Chess Master would tell you that when you are in jeopardy, the game requires bold moves.  Thankfully, for better or worse, we finally have an administration that is not adverse to "bold" moves, albeit often odd, disjointed, misguided and occasionally stemming from dubious motivation, but nevertheless "bold" moves.

Given the pickle we're in.....It will take some really BOLD moves to correct forty years of horrific economic policy.  I've listed the bullet points of the "Deal" America should be looking for from the current trade negotiations with China.

The "Bad Deal"

1.) Immediately stop these silly trade negotiations.  They are irrelevant and take everyone's eye off the ball.  A few billion in tariffs on soybeans, car parts, steel and Jack Daniels?  For each happy lobbyist we create a sad one.  Please...stop.....it's a political smoke screen to make the world believe that the Administration is actually doing something.

2.) In exchange for "Tariff Free Trade" with the United States, China must allow the RMB to float.  The Administration will deliver a "strongly worded letter" to the CCP requiring that the RMB become freely convertible, to any major currency within 6 months. (Six months is probably more than enough time since the CCP can copy and improve iPhone software, load it onto ZTE phones and ship 'em to Iran in a couple of weeks.  By comparison, passing policy at the Politburo shouldn't be that tough.)  Moreover, all Currency Controls must be eliminated.  The hard working Chinese people must be allowed to invest their savings, 3x the US Money Supply,  unencumbered, anywhere they want to.  Chinese banks would be required to facilitate this free flow of capital.....they would have been busy.  But of course, the CCP would never allow the RMB to float, and they would never lift Capital/Currency/SAFE Controls....these are the centerpiece of their economic plan....so it's all moot.

3.) If the Chinese Government fails to comply (they will say they have complied but they will not have), after six months, the US will enact an immediate trade Embargo on all Chinese goods......(Ouch!)

4.) The Administration will fully acknowledge that this Embargo would cause a Global Depression, the likes of which we've never seen, wiping out wealth like never before.  The value of America's largest companies (Apple, Walmart, Amazon, US Banks, etc.) would be decimated overnight.  The value and quality of the $3 Trillion of FOREX Assets on the PBOC's balance sheet would be called into question.  Oh well....easy come....easy go. 

5.) The State Department, along with the FED will be responsible for briefing and coordinating policy with the world's central bankers, BOJ, ECB, BOE, etc. organizing the transition, letting these bankers know they should be prepared, in six months or sooner as need be, to open the spigots and print money, supporting their respective economies like never before.  Helicopter money will become a reality.  This coordination would make the Post WWII Wiemar Republic monetary policy look hawkish by comparison.

6.) Immediately Announce this plan in a prime time Presidential address because, a.) The American People should know what they are in for and b.) It would make for great theater....and ratings.  We all know how the administration loves great theater/ratings.

7.) The upside, if there is one, is that no country has ever launched missiles or invaded another because of a financial/trade dispute.  Although, unfortunately, many of us will have to get used to living in shelters or outdoors for a while until this all blows over.

Isn't that a great, artful "Deal"??

Of course, to play devil's advocate, the CCP understands the American Political System all too well.  They know that the above negotiation, from America's perspective, is politically impossible.  It would be hard to fathom that the Republican Party (or any party) could possibly retain control of the White House, Senate or House....or any elected office for that matter, if they were to lead the country into a world wide global depression.

I shudder when I imagine what the campaign slogans might be if the Administration actually dared to go forward with "The Deal" as described above.... "Make America Survivable Again"?  or perhaps "Yes We Can!...uhhh....if Beijing says it's OK...."?

That said, the CCP also understands that Chinese people are much more flexible, loyal and forgiving of their leadership.  Under every circumstance, they support the party, do what they are told....or they know they will disappear.  Politics is much simpler, outcomes are more certain and consequences are much more immediate and direct for China's middle class than in America.  Whereas, the American Middle Class meanders aimlessly, simply wondering why they have less purchasing power than last year.

The CCP, with acute clarity, fully understands the inherent weakness in democracy.  Again, I'm no pollster, but I'm relatively certain that we Americans would tend to avoid voting for administrations where a global economic collapse took place on their watch.

“When the people find that they can vote themselves money that will herald the end of the republic.”  Ben Franklin


Further, American politicians don't want to vacate office or lose control, so like the Chinese people, content with their situation, rightly fearful of the consequences of "Bold" moves,  our Congress and Senate would accept their fate and kick the can down the road hoping to continue to hold their respective offices and that things will eventually work out.

My guess would also be, again, since our economy is in "check" and a few moves from "mate", based on the HUGE shift in the tone of the recent Tweet storms, we are quickly moving away from:

 "Trade Wars are easy to win" and "No deal! No talks! Fake news! China bad! So much winning!".....

Toward:

















There's a good chance that the new, conciliatory Presidential tone is the result of the Chinese giving our wet-behind-the-ears, inexperienced, negotiators, an ultimatum..... their own version of the aforementioned "Deal".

"Check" and "Mate".....

So I guess it's steady as she goes.....



The 34th Amendment

Executive Summary:  The text below is a tongue in cheek look at what the 34th and final Amendment to the US Constitution will look like if we continue on our current economic path.  I'm sure that the formal document will be written much better than this one, but the result will be the same.  As they say, it's funny because it's true.....

Let's get back to the initial question "What-if".....

So let's ask "What if" nothing changes?  Let's say that we continue this disastrous domestic financial and economic policy, allowing our economy, financial markets and "Capital Formation" to be directed from Beijing by proxy.  Let's say that Walmart, Amazon, Wall Street and our leadership continue to be covertly (unwittingly or not) directed by, or at least manipulated by the Chinese government, presumably for reasonable, maybe even more than adequate, compensation to America's elite.

Here's the path we're on:


The 34th Amendment to the Constitution of the United States
(circa 2076)

We, the political leadership of the American people hereby solemnly declare that we've ridden this beleaguered pony as far as it would f*&ing take us.  By this amendment we officially abolish that ludicrous, yet well intentioned charade of "a Government of the people, by the people, for the people....."  (Sorry....the Congressional Chamber erupted in laughter when I dictated that.....where was I?...)    Oh....That's right.....We're outta here!  You folks are officially on your own.  Good luck!

We've amassed enough wealth now where we can afford our private, self sustaining Caribbean and South Pacific sanctuary islands, private yachts and jets, as well as the requisite state of the art security systems and firepower, far enough away from "We the People" (aka "You the Rabble") that we finally feel comfortable and safe again.  It was touch and go for a while.

I know you were upset when you found out we converted those vacant Walmarts to Soylent Green processing facilities, but really, what were we supposed to do?....we had to feed you...  We couldn't let you starve!.....mass starvation would have really hurt our approval rating.

After Chicago fell and Detroit and Atlanta were burned ....AGAIN!....what is it with those towns ?  I mean really?  Anyway, we knew, that our days were numbered.  We, your (former) revered leadership had to get out of this shit-hole.  Based on the way things were heading, we thought it would be prudent to "git while the gittin's good"!  In hindsight, perhaps just a teeny-tiny little bit of gun control might not have been a bad thing.....

We, your revered (former) leadership, would also like to thank you for continuing to fall for all of that "Cut your taxes, reduce government regulation and release the power of the American worker" bullshit.  We are grateful that we could convince you that anyone who isn't your sponsored, fake, anonymous Facebook friend is actually your enemy not to be trusted.  We are also extremely and pleasantly surprised that you totally bought into the "Government is trying to run your life 'Deep State'" crap, allowing us to skate by without any accountability, filling the swamp to the brim while simultaneously blaming the "opposition" for the failure to provide any level of health care, public safety, financial regulation and absolutely no safety nets of any kind for you whining pussies.

We've given you everything you've wanted.  We've provided every addictive, self destructive vice we could think of (unlimited drugs, sex, fire arms, gambling, alcohol, tobacco, etc.) at your request.  We've made all of this easily available through a heavily marketed, unregulated, anonymous eCommerce system, only a few easy clicks away, delivered to you by the US Post Office from overseas at a cost far less than your late Aunt Millie used to pay to send out her Christmas presents.  i.e.) In the good old days, when she had a job and money....before she OD'd, God rest her soul.

Every one of you schmucks blessed this plan (and kept voting for us) every step of the way.  You cherished your inalienable right and God-Given-American freedom (with no associated responsibility) to do dumb-ass, self destructive crap with your money, your future and your lives.  We gave you the freedom to spiral into oblivion and you took to it like pigs to shit. 

We've given you your freedom and made you realize that everyone around you, the guy living in the refrigerator box across the way, or the little old ladies huddled in that abandoned church, as well as the family staying in that burned out car over on Main Street, is indeed your enemy out to get you.  Since we've left, and there is no more "America" per se, there's also no more "rule of law".  Just feel free to take what you want from whoever you want, keeping in mind of course, that they will do the same to you.  Luckily, you are all armed to the teeth and able to defend yourselves.  You will finally be able to test that "A good guy with a gun is the only thing that can stop a bad guy with a gun" thesis.

As a gesture of good faith, we'd also appreciate it if, when we send our servants and minions over to the mainland, to collect whatever valuables, rations and supplies that we might request from the former "We the People" from time to time, that you'll charge us a fair price and treat our minions and servants with the same respect and admiration that we've shown you for all of these years... ...ummm....well maybe just try to refrain from stringing them up....like us, they are/were just trying to do their job(s).

Anyway, no hard feelings and all the best!

Enacted into law this Day, July 4th 2076 heretofore to be known as "Dependence Day"....each of you poor bastards is now officially, fully dependent on your own resources (or what's left of them) and your own personal ingenuity for your very survival.....and the weak shall, unfortunately, perish from the earth.  That's what I call "Freedom" baby!   





Ex-54th President of the uncontrolled land mass formerly known as the United States of America.

PS: I can make you a great deal on some Heartland Condos I'm planning......WITH FREE INTERNET!.....just wire me a small deposit...Call me!  1-800-UPY-OURS






Footnote: The Alibaba Investor Call

I took (i.e. wasted) the time to listen to Alibaba's Q1 Investor Call.  Same old same old.  There were really no changes, save for the idea that a trade war with the US (or anything else for that matter) won't have any detrimental impact on Alibaba's ecosystem.  They are truly unstoppable.  Presumably, it's easy exceed expectations when management is fully comfortable with fabricating just about any numbers their little hearts desire.  Same fake numbers, fake metrics and lack of disclosure. Now, they've leaked that Ant Financial is worth $150 Billion, up another $50 Billion from last quarter!  They have the Midas touch indeed.

I've attached the links to the call, the press release, presentation and the filing below. Feel free to peruse at your own pace if you have the stomach.  For my analysis you can refer to my quarterly posts for the last three years.  Just update the numbers to reflect the current quarter.  Again, nothing has changed.

Press Release
https://www.alibabagroup.com/en/news/press_pdf/p180504.pdf

Presentation
https://www.alibabagroup.com/en/ir/presentations/pre180504.pdf

Webcast
https://edge.media-server.com/m6/p/z742sd9z

6-K
https://www.sec.gov/Archives/edgar/data/1577552/000110465918030651/a18-12785_1ex99d1.htm

REMEMBER:  YOU CAN'T SHORT THIS DOG YET!....THE CCP HAS THE OTHER SIDE OF THE TRADE!

Spare Change ......Selected Notes from Readers

This is a New Section I'll call "Spare Change":  I'm often given meaningful tidbits that pique my curiosity.  Usually, they are a "thing" but I'm not sure what the significance is yet....If you have something relevant/Interesting and you deem it "Spare Change" material, feel free to email it.  I've found my readers are beginning to shape the direction of this blog....I had never heard of the "Vancouver Model" until a reader put me in touch with Professor Langdale.

I enjoy following the trails you put me on.


1.) From a Reader Re: Caymans Registered Investment Companies

A reader sent me the following link.  It's the Cayman Islands Investment Fund Registration list.  More than 10,000 registered Investment vehicles.  I'm beginning to believe that everyone on the planet has money invested in the Cayman Islands.....whether they know it or not.

https://www.cima.ky/upimages/commonfiles/QuarterlyListofallMutualFundsregisteredandlicensedwiththeCaymanIslandsMonetaryAuthority-31March2018_1523637347.pdf

2.) Thoughts from Tim Bergin

The following paragraphs are taken from an email from Tim Bergin of Toronto, posted with his permission.  

It is a bit of a conundrum, higher rates means lower asset prices (equities), however this usually leads to lower bond yields.  This case may be different...

I waited to respond until after I had the chance to finish your recent post.  I just finished "The new phone book's here".  It was truly awesome/brilliant/all other similar adjectives.  I will need to read it twice.  Can I try to summarize and you let me know if I got it right?  Please see below:

China has two sealed-off and mostly independent currency markets.  Domestically they are pumping in huge amounts of stimulus.  But since they are a non-market based economy a lot of this stimulus is wasted as you point out the ratio of M3 to PGDP is terrible (and this relationship makes sense if you look at history).  With their capital controls, and big banks facilitating external funding - this inner inflationary pressure has not (yet) hit the currency as the peg is fixed and the external money has no mechanism to readily convert to anything else.  This has lead the Chinese to have it both ways, huge inner stimulation to appease the people.  Strong external currency to maintain purchasing power outside.  Your apple boomerang diagram was super helpful to understand all this.

As a result the RMB is extremely overvalued.  Which makes sense, if domestic Chinese entities are desperate to buy foreign assets, at any price, this does not happen if a currency is undervalued.  I have also read in the past the huge haircuts rich citizens are willing to take when trying to get their money out via Macau - meaning they know its overvalued.  I also had the pleasure of sitting on an airplane next to a young Chinese woman who had just purchased here first house in Canada, her question to me - How do Canadian people feel that China is using a fake overvalued currency to buy real assets?  She told me it was well known in China that the currency was too high, and whenever people thought it would drop they would rush to get cash out.  Interesting she told me friends of hers in the government had said that official budgets had much lower currency than the ones broadcasted publicly.  This is a couple years ago, but currency has not dropped as she expected it to.

Am I on the right path so far?

So that leaves us with a strange situation.  Domestic inflation, with a strong currency.  What are the mechanisms that cause this to end?  Not asking for catalyst (I hate that question, usually these things collapse of their own weight), just curious what actually occurs to break the status quo?  

What is interesting is that Chinese mainland wages are almost too high for it to be the factory of the world.  So could it be possible that a recession occurs in China and that prompts loan losses, and diminished confidence internal and externally force the government to break the peg?  Can a domestic recession happen if the government is willing to continually print stimulus?  How else does this break?

Also, why did they punish HNA/Anbang if they were carrying out the explicit goals?  Was it because their funding bases were such jokes, and they were so big that a disorderly collapse could bring whole on-shore/off-shore currency down?

3.) Escape From New York

A reader sent me this updated trailer from John Carpenter's Epic "Escape from New York" ....it's pretty entertaining......appropriately timed for the topics above.....Snake Plissken for President?



4.) The Vancouver Model

I'd like to acknowledge a reader from Vancouver (NOT named Rob Chipman) who put me in touch with Professor Langdale.  Until this e-introduction and my anonymous reader's contributions, I had no idea that the problem was as large as it is, or studied in the detail it has been.   There are questions as to the size and the scope (see the link below) of the problem, but I'd suggest that my friend Fred, and roughly 50,000 (this year) Canadians and Americans who've been through similar losses, are relatively certain there's a substantial problem.

http://www.robchipman.net/money-laundering-the-vancouver-model-and-my-confusion/

5.) DeadMalls.com

One of my readers sent me this wonderful site about the history of American "Malls", a treasure trove of video, pictures and stories about the destruction of the American Retail landscape.  Hundreds of abandoned US Shopping Malls referenced and indexed by state.  It's as depressing as it is informative!

http://deadmalls.com/index.html

******************************************************************************





Additional reading

Fortune 500 - 1997
http://archive.fortune.com/magazines/fortune/fortune500_archive/full/1997/101.html

TheStreet.com Article - Walmart eCommerce - Marketplace GMV a closely guarded secret
https://www.thestreet.com/story/14494348/1/walmart-disappointing-e-commerce-growth.html

Walmart - 1/31/18 10K
https://www.sec.gov/Archives/edgar/data/104169/000010416918000028/wmtform10-kx1312018.htm#sd34276b191444fa29b68b4b321c5c583

Amazon - 2017 10-K
https://www.sec.gov/Archives/edgar/data/1018724/000101872418000005/amzn-20171231x10k.htm#sF2423AEEA7FB5EE886EF78CF9324C2CE

Our primary source of revenue is the sale of a wide range of products and services to customers. The products offered through our consumer-facing websites and physical stores primarily include merchandise and content we have purchased for resale from vendors and products offered by third-party sellers, and we also manufacture and sell electronic devices. Generally, we recognize gross revenue from items we sell from our inventory as product sales and recognize our net share of revenue of items sold by third-party sellers as service sales. We seek to increase unit sales across our businesses, through increased product selection, across numerous product categories. We also offer other services such as compute, storage, and database offerings, fulfillment, publishing, certain digital content subscriptions, advertising, and co-branded credit cards.

Amazon - Bigger than we think - Discussion of non-reporting of GMV 
https://www.usatoday.com/story/tech/news/2016/10/20/amazon-online-sales-bigger-larger/92419572/


Private Equity - Boosting Some Brands and Crushing Others
http://fortune.com/2018/04/24/retail-private-equity-investors-mall-shopping/


Walmart eCommerce
https://www.thestreet.com/story/14494348/1/walmart-disappointing-e-commerce-growth.html


Amazon IPO 5/15/1997
https://www.sec.gov/Archives/edgar/data/1018724/0000891020-97-000868.txt

Current year (YE March 31, 1997) sales were US$16 Million.  Losses since inception were roughly US$9 Million and they were able to raise about $50 Million from the IPO.   Amazon had 256 employees at the time.

Census Retail
https://www.census.gov/data/tables/2016/econ/arts/annual-report.html

Walmart - 1997
https://www.sec.gov/Archives/edgar/data/104169/0000104169-97-000003.txt
1997 Revenue $104B,  Net Income $3B. $27B SHE with 728,000 employees.

Sears Roebuck - 1997
https://www.sec.gov/Archives/edgar/data/319256/0000319256-97-000005.txt

KMart - 1997
https://www.sec.gov/Archives/edgar/data/56824/0000950124-97-002230.txt

Target - 1997
https://www.sec.gov/Archives/edgar/data/27419/0000912057-97-013232.txt

Costco - 1997
https://www.sec.gov/Archives/edgar/data/909832/0001047469-97-003493.txt

Federated- 1997
https://www.sec.gov/Archives/edgar/data/794367/0000950152-97-002943.txt

May Company
https://www.sec.gov/Archives/edgar/data/63416/0000063416-96-000013.txt

Toys R Us - 1997
https://www.sec.gov/Archives/edgar/data/1005414/0001005414-98-000005.txt

Walgreens - 1997
http://files.shareholder.com/downloads/WAG/6216740887x0xS104207-97-8/104207/filing.pdf

Amazon IPO - What Amazon Shares are worth today?
https://www.geekwire.com/2017/live-amazon-rings-nasdaq-opening-bell-20-year-anniversary-ipo/

Vacant store fronts
https://www.nytimes.com/2017/11/19/opinion/nyc-empty-stores.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-left-region&region=opinion-c-col-left-region&WT.nav=opinion-c-col-left-region

Store Closings = Vacant small towns all over America
http://www.chicagotribune.com/business/ct-small-town-department-store-closing-0903-biz-20170830-story.html

When Walmart Stores Close - PBS
https://youtu.be/JgJt4sArUHI

Vacant Walmart Stores in upstate NY -
https://www.youtube.com/watch?v=gtx85nzI-M0

Living at Walmart - a place to call home
https://www.youtube.com/watch?v=h1AWLo_fK1U

Worst Places to Live in the US - 4.5 million views
Top 3: Camden, Detroit & Cleveland (Hey!!...My hometown made the top three!)
https://www.youtube.com/watch?v=8nGYkEBDjX8 

1.) Camden, NJ - 9 Walmarts
2.) Detroit, MI - 15 Walmarts
3.) Cleveland, OH -  ONLY 3 Walmarts
4.) New Haven, CT - 1 Walmart
5.) Memphis, TN - 7 Walmarts
6.) Stockton, CA - 2 Walmarts
7.) Birmingham, AL - 13 Walmarts
8.) New Orleans, LA - 8 Walmarts
9.) Oakland, CA - 2 Walmarts (One closed in 2017)
10.) Modesto, CA - 3 Walmarts
11.) Reno, NV - 6 Walmarts
12.) St Louis, MO - 4 Walmarts

Amazon to Increase Prime Membership 20% (from $99 to $119)
https://www.marketwatch.com/story/amazon-to-increase-prime-subscription-price-to-119-a-year-2018-04-26?siteid=bnbh

Warren Buffett - "Unleash the potential of the Chinese People".....even Warren has been fooled.
https://www.yahoo.com/finance/news/warren-buffett-china-found-secret-sauce-183809314.html

CDC - Opiod Overdoses Skyrocketing
https://www.cdc.gov/media/releases/2018/p0306-vs-opioids-overdoses.html

CDC - Opioid Deaths
Opioids—prescription and illicit—are the main driver of drug overdose deaths. Opioids were involved in 42,249 deaths in 2016, and opioid overdose deaths were five times higher in 2016 than 1999.
https://www.cdc.gov/drugoverdose/data/statedeaths.html

The Vancouver Model -  Real Estate Pricing
https://betterdwelling.com/city/vancouver/a-brief-history-of-foreign-buying-of-vancouver-real-estate/ 

Amazon Debit Card - Mexico
https://www.reuters.com/article/us-amazon-com-mexico/amazon-launches-first-debit-card-in-mexico-e-commerce-push-idUSKCN1GP35A

Amazon Cash at 7-11 - Video
https://www.youtube.com/watch?v=3jgZ8xn4cUY

Amazon Cash at 7-11
https://paymentweek.com/2017-11-8-7-eleven-steps-mobile-payments-amazon-cash/

Amazon Cash - The Register
https://www.theregister.co.uk/2017/04/03/amazon_gets_into_scrip_game/

Thompson Reuters AML Training
https://risk.thomsonreuters.com/en/compliance-training-courses/anti-money-laundering-aml-training.html#request-course-trial

Amazon Packages - Picked & Shipped with less than 1 minute of Human Contact
http://money.cnn.com/2016/10/06/technology/amazon-warehouse-robots/index.html 

10 Worst Small Towns in America - video
https://www.youtube.com/watch?v=lF2Pw_xFCn4

10.)  Kokomo, IN - Walmart Super Center 
9.) Ardmore, OK - Walmart Super Center
8.) Niagra Falls, NY - Walmart Super Center
7.) Anderson, IN - Walmart Super Center
6.) Rocky Mount, NC -  Walmart Super Center
5.) Pine Bluff, AK - Walmart Super Center
4.) Leitchfield, KY - Walmart Super Center
3.) Elkhart, IN - Walmart Super Center, Walmart Super Center (Note: Elkhart, IN actually has two Super Centers.  Walmart is actually Elkhart's largest employer.)
2.) Fort Pierce, FL - Walmart Super Center
1.) Gallup, NM - Walmart Super Center

The Pain Hustlers - Opiod Marketing in America
https://www.nytimes.com/interactive/2018/05/02/magazine/money-issue-insys-opioids-kickbacks.html?action=click&module=MagazineModule&pgtype=Article&contentCollection=Magazine&region=Header

RELOADABLE WALMART PREPAID DEBIT CARD
https://www.walmartmoneycard.com/getacardnow?utm_source=WMMC_BING_search_PrepaidCard&utm_content=EA-CashRewards&msclkid=88594995e6781cfa239f1372a0a731cd

Walmart MoneyCard Major selling point is "No Credit Check"!  I'm sure Walmart's highly trained minimum wage employees are highly trained in fraud prevention and AML rules.
http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-irhome

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW CARD ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens a Card Account. What this means for you: When you open a Card Account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see a copy of your driver’s license or other identifying documents. Card opening is also subject to other fraud prevention measures. While there is no credit check to get a card, certain features are subject to the use of a consumer report. You will be notified prior to any use.

GreenDot Moneycard Agreement

https://www.walmartmoneycard.com/account/legal-info-page?doc=cha&productname=mc-cbr

1.) Max prepaid balance on card is $10,000.  $2,999/day maximum.  
Load/Reload Limitations. The maximum daily cash reload limit is $2,999, but maximum in-store reload limits also apply and you may not load cash to your Card at any time the funds balance on your Card exceeds $2,999. We reserve the right to accept or reject any request to reload your Card at our sole discretion. Only the primary cardholder may reload the Card. The Card is not interest bearing. General Limits on the Use of Your Card. The overall maximum amount of value that can reside on the Card is $10,000. You are not authorized to conduct transactions that in the aggregate exceed $3,000 per calendar day. For security reasons, we may limit the amount, number or type of transactions you can make on your Card and any funding or reload of your Card. You may only withdraw up to $400 from an ATM and $1,000 from a Walmart register in a single day and $1,500 per teller transaction, unless otherwise indicated. Your Card cannot be used at ATMs outside of the United States. We may, in our sole discretion, further limit your use of the Card at ATMs, and, in addition to our limits, an ATM owner or operator may impose additional withdrawal limits

You agree that you will: (i) not use the Card at unlawful domestic or international gambling web sites, or at payment processors supporting unlawful gambling web sites, or to purchase illegal goods or services; (ii) promptly notify us of any loss or theft of the Card


You also have the right to obtain a 60-day written history of account transactions at no charge by calling the telephone number above or the number on the back of your Card, or by writing us at Written History Request, P.O. Box 5100, Pasadena, California 91117-0100. Please include your name and Card number. You will not automatically receive paper statements.


Green Dot Corporation is headquartered in Pasadena, California, with additional facilities throughout the United States and Shanghai, China.  The Company was founded in 1999 and went public in 2010 (NYSE: GDOT) 

Our gross dollar volume was $31.8 billion (Total funds run through the cards) - pg 34 up from $5.8 Billion in 2009


https://www.sec.gov/Archives/edgar/data/1386278/000138627818000013/form10-kxgdot12312017.htm


Walmart in China - 443 Units - Most (406) are Super Centers
https://corporate.walmart.com/our-story/locations/china#/china

Walmart MoneyGram - 200 Countries.  Major cities in China - 71 locations in Beijing, 90 locations in Shanghai.  All major Chinese cities have handy Walmart/MoneyGram send/receive locations.
https://walmart.moneygram.com/locations

Locations in China - Through the BOC/ICBC/CITC accept and receive currency in USD, EUR, AUD, GBP.  Major global currencies except RMB.


The Brookings Institute - The Middle Class and the Economy
https://www.c-span.org/video/?445222-2/middle-class-economy

Vancouver Real Estate
https://betterdwelling.com/city/vancouver/a-brief-history-of-foreign-buying-of-vancouver-real-estate/ 

The Vancouver Model

Canada Breaks Record for Opioid deaths


We the People Seller Reviews - Walmart
https://www.walmart.com/reviews/seller/335?offerId=A80A1BED777F4AB3BFFCD03B8CFFBA38














https://www.amazon.com/dp/B07772VQYX/ref=olp_product_details?_encoding=UTF8&me=

When we search the UPC Codes we see that this product 609853100013 is listed on a number of places all over the world at prices ranging from $15 to $300.

The Ebay site was

https://www.upcindex.com/609853100013

  1. Amazon
  2. Amazon Canada
  3. Amazon UK
  4. Jet.com
  5. Rakuten US (Buy.com)
  6. eBay
The eBay site was particularly interesting since a bag of this stuff apparently recently sold for $265.46 with the auction just ending in February.  The Auction was held by "EssentialHardwareUSA"


Bloomberg - Getting Money out of China
https://www.bloomberg.com/news/features/2015-11-02/china-s-money-exodus

Amazon and Walmart, taking a page out of the Alibaba playbook......no disclosure of GMV?  Why?

Potting Soil


https://www.walmart.com/ip/BUMPER-CROP-ORGANIC-SOIL-AMENDMENT/165159583#read-more

Steve Brill - Time Magazine - Tailspin
http://time.com/5280446/baby-boomer-generation-america-steve-brill/

U.S. Suicide Rate Surges to a 30-Year High
   
How Evil is Tech - David Brooks

















12 comments:

  1. Reading your post, I can't help but think of all of this mess as a Chinese version of the opium wars, but geared towards the US. The Brits got their way and opened china to commerce and opium in the 1860s, and morphed it into a "shithole" for the following century. Now the US seems geared towards a similar fate, without, as you said, the Chinese having to fire a single shot.

    The 34th amendment sounds to me as the US version the Convention of Peking, referred to as the "unequal treaties" by China. I would have gone with "The very bad deals" for a nickname, but "Dependance Day" sounds every bit as accurate.

    Anyway, another very insightful post, thanks for the read.

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    1. You are indeed a student of history.....few people would have made the connection between the Opium Wars, Peking Convention and "unequal treaties" to what's happening in the US today (i.e. Managed RMB, fake ADRs/IPOs, IP Theft, TheResearchChemicals.com et al, etc. etc...) or as our Administration puts it ....."CHINA BAD!"

      I'd suggest that the 34th Amendment is more aligned with what might happen if the US fails to have a "Peking Convention" moment and address the current "unequal treaties".

      As I described, there are limitations in the direction our government/structure/Democracy can take .....unlike the Chinese path, I don't believe that the US will approach a dictatorship or a US version of a full blown, Americanized, sort-of-good-old-boy Communism .. ..but as history shows us, time and time again, the world's various versions of "We the People" are capable of voting for and condoning/tolerating just about anything.....so you never know....

      Thanks for taking the time to read my work.....

      DT

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  2. I have lots of respect for what you've done here re Alibaba, but much of this past comes across as (insane) ranting.

    Yes, it's known that Amazon keeps allot of it's numbers close to it's chest. But every once in a while, they open up about another thing and the stock pops. (like the recent 100m Prime members announcement. Or AWS before that.)

    Is Amazon used for for money laundering? Certainly . But Amazon's scale in real selling is enormous. I personally know a guy who sells just a few dozen skus on Amazon. Shoe trees. Thousands of them weekly .(made in USA, btw.)

    I'd wager that we'll over 95% of Amazon is real business. Cutting out middlemen, and squeezing everyone down from the manufacturer in exchange for volume . Massive volume .

    They may be ruinious for the economy and not make money, but the numbers are real .

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    1. Well , actually Amazon is the new middleman .

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    2. Agreed....Amazon is the new middleman for the Chinese Communist Party...

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  3. Thanks for reading Ben, as you say, "They may be ruinous for the economy and not make money"....this concept, driven by Chinese interests and policy, was the point of the post.

    One man's insanity is another's reality.....

    All the best.....

    DT

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  4. I also agree that most of the resselers in these marketpleces are legit . However they are just playing the now fully automated "Retail Arbitrage" game .

    This is not sustainable, people will eventually find out cheaper sources but this is a subject for another post MR. DT!

    https://www.wsj.com/articles/the-mystery-of-the-70-hoodie-thats-all-over-facebook-1526817601

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  5. Thanks for the post. Agree with most of what you say here. I only pause at your negative bias towards (hopefully responsible) gun ownership. We must be eternally vigilant and protective of the right for individuals to bear arms, regardless of the cost -- for the protection of their personal property and freedom from all tyrants. Kind regards.

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    1. This comment has been removed by the author.

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    2. I guess I'd pose the question, how do we promote responsible gun ownership if we have no criteria or process for determining if the gun owner is indeed a responsible person?

      Measuring "responsibility" permeates every aspect of our lives now, licenses, insurance, finance, education, credit, healthcare, etc. The list is endless. Our occupations, livelihood and access to virtually everything we achieve are all based on some sort of testing and assignment of levels of graded responsibility, yet we ignore this evaluation method for gun ownership?

      My ownership of a gun gives me the "right" or at least the ability, to take your life if I so choose....yet, as a society, we have no say in whether I should have that "right"? Who gave me the "right" to be your executioner?...or you mine? We know nothing about each other yet we can arm ourselves to the teeth. "Hopefully" as a society we should just pray that you or I don't have a bad day?

      On the other hand, we do know with certainty and with perfect hindsight, that the 20,000 Americans +/- who blow their brains out every year, by definition, weren't all that "responsible". I guess that "hopefully" is indeed the operative descriptor here.

      I grew up in Wisconsin, I'm an avid sportsman, and a gun owner. But I further doubt that you and I and our shotguns and deer rifles would be a worthy deterrent, able to fend off a "tyrant" with an army. That doesn't sound like the best plan we could come up with.

      I have no desire to shoot anyone (or be shot) and take on a starring role in the next Ruby Ridge or Waco-esque documentary because I disagree with my neighbor, our government or some process.

      I hope you don't either.

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  6. jeff bezos was not a poor struggling book seller, he was an employee of hedge fund D.E.Shaw

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    1. Yup, he spent a couple of years as a VP at DE Shaw....Princeton grad, engineer & all around talented guy. No question about his ability and creativity. But at the time Amazon was losing money hand over fist. If those early years were not "struggling" I don't know what is.

      Without the help of Wall Street's "Capital Formation" Engine, the tilted playing field and later, the CCP Master Plan, Amazon (and Walmart for that matter) would have withered away unnoticed.

      Thank goodness Jeff was able to cultivate all of those Wall Street & CCP relationships. It made him, and a relatively few others, wealthy beyond anyone's wildest dreams. On the other hand, I doubt that the folks in heartland America would be all too happy about his success if they truly understood what's happened to them.

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