Home Amazon Ted Bauman Says Amazon Isn’t a Monopoly, Warns Shareholders of Vulnerability

Ted Bauman Says Amazon Isn’t a Monopoly, Warns Shareholders of Vulnerability

ted bauman warns against amazon stock
Ted Bauman Says Amazon Isn't a Monopoly, Warns Shareholders of Vulnerability

Back in 2008, the king of the tech world was a guy named Steve Jobs. That was the year Steve introduced a device that would change the world.  As we all know, that device was the iPhone. And indeed it changed his entire company.  Today the iPhone is the most popular Smartphone in the world according to the market research firm Kantar Worldpanel. It singularly represents over 75% of total revenues at Apple.

More than anything else, this single product has made Apple the monopoly power in the market. It made it possible to create an Apple ecosystem of interrelated devices that has successfully locked hundreds of millions of consumers into the Apple brand.  As a result, Apple is the world’s most valuable, becoming the first company worth over $1 trillion.

Steve Jobs passed away in 2011 but a younger version named Jeff Bezos of Amazon has stepped in to fill the leadership Jobs left behind. Amazon is the fourth most valuable company on the New York Stock Exchange with a market cap of $560 billion and sells just about everything. Tens of millions of people subscribe to its Prime membership program for free shipping, free TV and free movie streaming.  Prime members count on Amazon as their first, and often only, stop for online shopping.  Annualized revenues currently run at nearly $170 billion.

Online retailing isn’t the only industry Amazon is dominating. Its Amazon Web Services, known as AWS is the leader in cloud computing generating nearly $5 billion in revenues. Then you can add last year’s $13.7 billion of giant Whole Foods and you get the idea that Jeff Bezos goal is to create the same product and service monopoly that his buddy Steve Jobs left for Apple.

As one of the world’s richest men, Jeff Bezos can get most anything he wants.  But has he succeeded in reaching his dream?  Is Amazon a monopoly?  The well known and highly respected economist Ted Bauman says no, Amazon isn’t a monopoly but goes further to warn shareholders of Amazon’s vulnerability.

Meet Ted Bauman

Some economists spend their days appearing as talking heads on CNBC or Bloomberg TV. Others spend their days keeping their focus on critical financial and investment issues. Ted Bauman fits into this later group. In other words, Ted’s eye on delivering results for his followers. Many of you now reading this article are familiar with Ted’s work but for others, here is what Ted Bauman is all about.

Ted is the editor of The Bauman Letter, a monthly publication totaling over 100,000 subscribers devoted to enabling readers to preserve and secure their wealth through innovative investment, legal and personal strategies.

In addition Ted also writes Smart Money service, an ETF-trading platform and Alpha Stock Alert, a weekly stock trading service. Both are based on systemic or “algorithmic” trading systems that he developed.

As an economist rather than a conventional stock analyst, Ted is able to bring a wider perspective to market developments and provide readers with unique insights into the things that bring them profit — and those that threaten it.

Ted Bauman’s Views On Amazon

Amazon today is the modern equivalent to the Sears catalog first published in 1888. Just like Richard Sears did back in his time, Jeff Bezos effectively provides an ephemeral commodity economics recognized as “location” In other words, when people’s wants and needs lead to a buying decision, they want it immediately and place a huge value on immediate gratification.

Ninety million people currently hold Prime memberships. Amazon sells almost nine out of every 20 products that Americans order online.  The thirst for immediate satisfaction is fueled by Amazon’s vast selection of merchandise, competitive prices and fast delivery.  This serves as a magnet for outside distributors connecting sellers and buyers.

Ted Bauman Amazon Monopoly
Ted Bauman doesn’t believe that Amazon is a Monopoly, here’s why.

But Not A Monopoly

Experts believe Amazon will control half of the online retail market within three years. But Ted disagrees with those experts who call Amazon a monopoly that should either be restrained or broken into component pieces. Bauman remarks that Wal-Mart produces about three times as much revenue. Jeff Bezos’ company generates less income than the Kroger supermarket chain, according to New York Magazine. Online shoppers still don’t order the majority of items from it. Wal-Mart, eBay, Apple, Target, Macy’s and other rivals represent 56 percent of the e-commerce market.

Furthermore, Amazon’s sales haven’t had a tremendous impact on most conventional merchants. Less than one-twentieth of all U.S. retail income goes to the company. How is this possible? Although e-commerce has experienced rapid growth and attracted extensive media coverage, many traditional stores remain quite popular. They still generate more than nine-tenths of retail revenue in the United States.

Some critics highlight this company’s involvement in numerous industries. It sells items that range from cough drops to washing machines. Amazon also offers an assortment of computer-related services. Nonetheless, it faces viable competitors in most economic sectors. Target, Big Lots, Kohl’s, Dollar General, Home Depot and Wal-Mart sell many of the same products at competitive prices. Specialty retailers like Apple and A.C. Moore compete with it as well.

The Seattle Internet giant has sought to play a bigger role in the grocery sector. It introduced Amazon Fresh and bought Whole Foods. However, these actions haven’t enabled it to dominate this industry. Five other supermarket chains exceed the size of Whole Foods. It has failed to achieve significant price reductions, and some shoppers feel that quality deteriorated after the acquisition took place.

Despite occasional missteps, most Americans express comparatively positive opinions about Amazon. Bauman notes that real monopolies usually attract stronger criticism from the public. He mentions large telecommunications businesses as examples. Monopolistic firms tend to provide poor customer service and charge exorbitant prices. Bezos’ company still has enough competitors to prevent it from doing so.

The Grudging Respect Test

Rival merchants certainly feel less fond of Amazon than the public, but they normally don’t claim that it uses anti-competitive tactics. It hasn’t had ruinous effects on the in-store sales of most large, powerful retailers. Comparatively few shoppers choose it instead of the nearest grocery, hardware, dollar or drug store. Numerous local bookshops have closed their doors, but they have too little political influence to call for antitrust action.

Contrast this with the heydays of the so-called WinTel monopoly when both Microsoft controlled 90% of the personal computer market in cahoots with The Intel Corporation.  During that time countless law suites and even a Congressional hearing or two were held to examine the WinTel hold on the marketplace. The application of anticompetitive practices was revealed on countless occasions.  However, when it comes to Amazon, none of these scenarios are present.

Read: Amazon Prime Day is Expected to Generate More Than $3.5 Billion in Sales

The Legend of Amazon Grows

With 2 hour delivery and pickup lockers, Amazon has come to dominate ecommerce.
With 2 hour delivery and pickup lockers, Amazon has come to dominate ecommerce.

In the early years, the Seattle-based company focused on books and DVDs. Through massive product diversification, Amazon eventually came to dominate the world of e-commerce. Ted Bauman believes that their dominance of internet sales will continue for a long period of time. Small independent retailers can no longer succeed by selling mass-produced goods, although a few exceptions exist in some locations and industries. Companies like Amazon, eBay and Netflix benefit from new technologies that give consumers a broader selection of products while cutting costs and boosting convenience.

Serious Concerns: The Other Side Of Amazon

One of the strengths that separate Ted Bauman from the heavy bias of today’s media is his willingness to address a financial issue in a balanced manner.  In that spirit, here are some of his concerns you should keep an eye out for.

Various commentators and political figures have accused Amazon of employing unfair business practices. They warn that it has a negative impact on the retail industry. The finance expert mentions that Amazon has contributed to the loss of many local shops.

Lately Ted has been pointing to a few of his major concerns with Amazon: data security. As an online the corporation, Amazon collects an enormous amount of information on its customers. This important issue prompted Ted author a lengthy guide to Internet privacy and security that he recently published. Here are the 8 key recommendations from that guide.

  1. Get Signal and/or WhatsApp for mobile messages: Signal is a sophisticated Swiss messaging app that fully encrypts all your text messages. It requires both parties to use it, so it isn’t ideal for everything.
  2. Encrypt your computer’s hard drive: As described in Privacy Code 2.0, full disk encryption makes the contents of your computer totally unintelligible to anyone without the password.
  3. Get a password manager: Using secure apps and utilities like those above means having passwords — lots of them. Don’t write them on your palm
  4. Use two-factor authentication: Most email programs, cloud storage utilities, banking apps, social media and other sensitive applications these days offer two-factor authentication (TFA).
  5. Use HTTPS Everywhere: The Electronic Frontier Foundation developed a browser plug-in for Firefox and Chrome that forces websites you visit to use the most secure connection protocol.
  6. Don’t rely on your browser’s “incognito mode” to do things it wasn’t meant to do: Browsers like Chrome, Safari, Opera, Firefox and Microsoft Edge allow you to start a browsing session that doesn’t record anything you do during that session.
  7. Use DuckDuckGo for sensitive searches: DuckDuckGo is an alternative search engine that doesn’t record your searches or anything else about you.
  8. Use a virtual private network (VPN): As Ted’s privacy report explains, a VPN is the best all-around protection you can get on the Internet, because it encrypts everything you do, including your identity and location.

Using these tools to protect his privacy, Ted frequently orders merchandise from the massive online retailer. He started using its website more than a decade ago because he wanted to buy niche items that rarely appear on the shelves of traditional stores. His purchases ranged from obscure movies to anime-related gifts for his daughter. Bauman praises the vast product selection, affordable pricing and rapid shipping.

Squeezing Suppliers

Amazon has become far increasingly unpopular with suppliers. The company regularly pressures them to cut bulk prices. It removes manufacturers’ merchandise from product search results if they refuse to charge less, according to some suppliers. This behavior has the potential to provoke government action. Bauman comments that U.S. officials largely ignore the public but pay attention to the needs of manufacturers.

Putting The Squeeze On Shipping Rates

What Ted Bauman thinks about Amazon
Amazon negotiates with the United States Postal Office to deliver to their customers on time.

Amazon appears to negotiate with shipping services in a similar way. The postal service, FedEx and UPS can’t afford to lose this client, so they comply with its demands for lower prices. This practice has drawn President Trump’s ire. POTUS also criticized the company for avoiding taxes. Trump also expressed anger about negative articles in The Washington Post. Amazon’s CEO owns this newspaper.

Stock Sell-off

How anyone or any company gets on the wrong side of the White House is a mystery. So far this year Amazon has been on the receiving end of harsh criticism from POTUS.  However, Amazon generally and Jeff Bezos specifically are in the crosshairs of the president and that has already cost shareholders.

After the president made harsh comments about Bezos and his companies, the value of Amazon stock tumbled. But other factors contributed to the sell-off as well. Amazon’s stock price is sensitive to trade and tariff issues both real and threatened. Bloomberg recently reported that the China-U.S. trade war could harm this corporation because Chinese workers manufacture its electronics.

Finally, it is important to remember that Amazon is a major investment component to the technology sector where various scandals and safety concerns caused the prices of major technology stocks to plummet.

The Big Risk

Although it produces massive profits, Amazon doesn’t pay dividends. It uses extra funds to buy other companies and introduce new services. The Bauman Letter’s editor explains that this strategy could pose a bigger threat than any of the aforementioned problems. Why? Traders can only profit from this investment by selling it.

Consequently, stockholders are more likely to unload Amazon shares at the first sign of trouble. This makes the Internet retailer quite vulnerable to tech industry scandals, new tariffs, presidential tweets and other unexpected developments. Ted Bauman warns that Amazon’s stock value could continue to drop in the months to come. This may also cause the share prices of numerous affiliated companies to fall.

Bauman has traveled the world, learning about several different economic and political systems in the process. He lived in South Africa for more than two decades and witnessed the collapse of apartheid. The renowned economist returned to the United States after working for multiple nonprofits and graduating from a college in Cape Town.

Protecting Personal Freedoms

These experiences helped him recognize the importance of protecting personal freedoms from authoritarian governments and monopolistic businesses.

An economist by training, Ted grew up in the U.S. but emigrated to South Africa in the mid-1980s where he became deeply involved in the development and implementation of post-apartheid economic and urbanization policy.

Advising Governments

Over the course of the next two decades Ted served as a consultant to a variety of entities, including African and European governments and the United Nations, traveling extensively in Africa and Asia and developing a keen understanding of the relationship between political and economic dynamics in various societies. He was invited to publish his research and commentary in a number of prestigious international journals, including The Journal of Microfinance, Small Enterprise Development and Environment and Urbanization.

Returning Home

In 2008, Ted returned to the U.S. to work for a large Atlanta-based nonprofit organization as their Director of International Programs. Using my economist background, he developed a focus on techniques to assess organizational sustainability and effectiveness.

Ted joined Banyan Hill Publishing (then called Sovereign Society) in 2013 as a part-time editor with an eye toward assuming his father Bob Bauman’s existing asset protection and wealth management portfolio.

Applying his economic training and extensive international experience to his writings, Ted quickly became a popular voice in his own right.

Leading Investment Voice

Now as the editor of The Bauman Letter, a monthly publication devoted to enabling readers to preserve and secure their wealth through innovative investment, legal and personal strategies. His readership is the largest in the Banyan Hill group, with over 100,000 subscribers.

As noted earlier, Ted expanded his universe to include the Smart Money service, an ETF-trading platform and Alpha Stock Alert, a weekly stock trading service. Both are based on systemic or “algorithmic” trading a system that was developed jointly with top Wall Street experts.

As an economist rather than a conventional stock analyst, Ted is able to bring a wider perspective to market developments and provide readers with unique insights into the things that bring them profit — and those that threaten it.

Wrapping Things Up

We hope your time spent reading this article has accomplished two things.  First for those who haven’t been exposed the thinking of Ted Bauman, here is your invitation to look into his other thoughts and well researched work. The link below will take you much more of Ted’s economic research.

Secondly, with so many investors trying to decide on the role of technology in their investment planning, here is one expert investors views on one of the most widely own tech stock and the fourth largest capitalization company on the New York Stock Exchange. We hope you have benefited from the experience.

Learn More About Ted Bauman