Monday morning tweets from President Trump set off panic bombs from many of the news media outlets. Even Fox News’, Shepard Smith called out a direct correlation between the morning tweet of the POTUS to the mid-day decline of Amazon stock. News flash Shep, all tech stock took a dive on Monday, just as they did last week. This is a volatile market, so you might as well strap your self in and hold on. The media frenzy is just feeding President’s Trump ego to report he is responsible for the movement up or down of a particular stock. However, hey, I am sure he loves it.
Now for full disclosure, I am an Amazon Prime junkie. I love shopping late at night on my sofa with a nice glass of cabernet, and then in two days, the products show up on my doorstep. Also, I admit to being jealous of those who had nerves of steel and bought AMZN in June at $885 per share and on Monday (after taking a nose dive) is priced at $1,372. I also believe in capitalism and don’t want the government getting involved in picking winners and losers when it comes to free commerce.
TRUMP MAKING NOISE TO GET ATTENTION
It makes sense President Trump is not happy with an independent agency under the executive branch which runs a year over year loss north of $5 billion and that he is looking for a fix. It is just icing on the cake for the POTUS that he can drag Amazon, the largest customer of the USPS, into the mud while calling out significant problems within the Postal Service.
His recent tweets claiming Amazon does not pay taxes and accusing them of scamming the U.S. Postal Service might be his way of creating noise to get the attention of those he can count on to run to and fro screaming “the sky is falling, the sky is falling!” Let’s face it, attacking Amazon a.k.a. Jeff Bezos, a.k.a. The Washington Post will get more attention and give President Trump more coverage than a simple tweet saying: The U.S. Postal Service has been struggling for years, losing much money and we need to figure out how to turn things around.” How boring!
The crux of the matter can be found in the president’s tweet in late December where he wrote, “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!”
WHY THE USPS CONTINUES TO LOSE MONEY
As a businessman, and one who does not like to lose money, the president is correct that the Postal Service is not covering its costs to deliver packages, and with Amazon’s significant presence, they seem to be a fair target. Target yes, the cause, no. There are other glaring issues at the root of the USPS’s financial woes.
For years the U.S. Postal Service had been losing money. They have a forced business model which gives them the monopoly over what is “the dying first-class mail delivery.” The price of a stamp, literally pennies, is expected to cover transportation not just across town, but to every corner of the country. Problems with profitability multiply when you add the dramatic decline in volumes of first-class mail due to the escalation of email and the explosion of the parcel delivery business. Strong business acumen would dictate, raise your prices. Unfortunately, the Postal Service has been unable to compensate for the industry changes due to a law imposed by Congress in 2006. The legislation caps price increases at the rate of inflation and also limits the proportion of its budget that could be devoted to its parcel business.
Furthermore, Congress has tied the hands of the Postal Service by requiring it to pre-fund its retiree health benefits and count them as operating expenses. In fiscal 2016, the Postal Service reported a $5.6 billion net loss, but that’s only because they spent $5.8 billion funding the retiree health benefits. Otherwise, they would have posted a slight profit. There is currently pending legislation in Congress that would give the agency more control over its operations and relieve it of the burden of pre-funding health, but the Postmaster General is not holding her breath.
ATTENTION AND CHANGE VIA DISRUPTION
President Trump understands the core issues as they relate to the financial problems plaguing the USPS and he knows the best way to get attention is through disruption. Maybe he is to blame for the fall of Amazon stock, who knows? It is ironic though that the mainstream media who are skewering the president for hurting Amazon and causing Jeff Bezos to have lost approximately $20 billion over the past couple of weeks. Remember these are the same folks who vehemently attacked President Trump for passing a tax law that benefited the rich by pouring more money into the stock market. This ongoing acute case of amnesia of the media, driven by Democrats, is truly nauseating.
Jeff Bezos runs his companies, just like President Trump leads this country, by disrupting the “way it always worked (or didn’t work) before” and pushing toward new opportunity and wealth. One might say they are “birds of a feather…”