Victory Lap For Amazon: Earnings Beat Estimates Again

Let's bring in our good friend Burt Flickinger, managing director at Strategic Resource Group. He is the go to person on all things retail in Bert. We saw some really impressive numbers out of the e commerce giant last night, didn't We were very impressive numbers And what it really uh synthesizes is Jeff Bezos and to his credit McKenzie Bezos, his first wife, who helped co find the company, really taking a victory lap with six consecutive quarters of beating estimates,

significant of late. And the key thing now is Amazon, by this time next year is going to be the biggest retailer worldwide, eclips in Walmart and everyone else. So what is the future like then for investors? I mean, we saw a record EPs, but Jeff Bezos has been known to turn the tap on and turn the tap off in terms of profits. And that's a great, great question,

Matt and Uh. For us, the key thing is on tap on and off is Bezos and Amazon are increasing cap acts or capital expenditures by over a hundred year over years. So the number to look at is a hundred and eighty five distribution centers worldwide. They'll have more distribution centers in Walmart and everyone else, more efficient, more effective in What's particularly telling in Amazon's release is that everything solar and sustainable houred. So Amazon's making money from

solar and using it to lower prices. And the perfect compare and contrast is Long Beach, where Kroger and others would not pay Hero pay and they would not put solar on the roofs to save money, made money, lower prices, and increased workers wages Amazon does. Kroger's closing up in Long Beach, California, and Amazon's opening it's it's new Amazon Fresh stores there. Uh to take run the table from California to the East coast. But it's just yeah, just extraordinary.

I'm wondering about kind of their geographic footprint here, I'm just looking at the p g PGeo function on the Bloomberg terminal gives you a geographic breakdown of the revenue about six in North America International. Then the rest is aws, do you expect Amazon to increased investments is to try to really grow their international footprint? Yeah, Paul, definitely. Amazon's international growth that you're good point is fifty seven percent

versus UH overall UH total total corporate growth. And international's going to be a tremendous opportunity as both the COVID nineteen pandemic and combined with the accelerating ice age worldwide, Amazon is just just going to replace shopping centers and shopping malls. And look at Amazon's landing page for Mother's Day, you don't have to go any place to get anything from chocolate, candy to close to tech. Uh. And Amazon International is going to be a big part of the

growth story going forward. And Paul, the reason why you're questioning on international is so important is Ali Baba with Singles Day generated thirty point seven billion and one day last year, Amazon Prime in two days generated ten point four billion. So if Amazon is adding two to three more Prime days a year, and then add singles day internationally.

Uh Amazon, Amazon can beat everybody uh in in e retail and the one Achilles seal for Amazon right that, right now is food retail, where the cops are still negative. And and as you mentioned the prior segment concerns about the Federal Grade Commission. But it doesn't look like there's any an a trust in the future either. I mean,

it's gonna be hard to beat local there. I have here in Berlin occasionally looked at getting food off of Amazon, but it's not as good as we've got local services like Guerrillas that deliver in literally ten minutes, I mean sometimes less than ten minutes um. And I've become addicted to that. I wonder though, in the bigger picture, bur you mentioned at the top that Amazon is going to

overtake Walmart as the biggest retailer in the world. The Walton family can't take this lying down, right, Doug McMillan has to do something about it. Walmart's got you know, a million more employees than Amazon, and their market cap is less than a fourth of Amazon. They're trading for three billion dollars. Amazon's trading from one trillion what can Walmart do about this to try and class some of

that back. Walmart can win on food, Matt and that's that's Ben Ben, Amazon's on going Achilles Heel and uh Walt, Walmart will be able to deliver to of the US population by the end of this year. So Amazon wins, Walmart wins, Target wins, just about everybody else loses. And and what I like about your Berlin comment is you know better than I do, uh gallery kalpof Karstat. A lot of the department stores have either closed or cut back in Germany and throughout the EU, and Amazon's growing

and replacing the bricks and mortar stores. And what's notable your time about Berlin and Europe is Walmart failed with all three formats in continental Europe. So where Walmart's failed, uh, Korea, Germany and elsewhere. Amazon's winning just about everywhere, and we'll continue to win. Yeah. Absolutely. I mean going online is a more pleasant experience than going into a calf off, I'll tell you that. And and a cars dot and they are we see him closing left and right around here. Bert,

thanks so much for joining us. Bert Flickings, you're there talking to us about Amazon he's a managing director at Strategic Resource Group. Well here in the United States, the story about the vaccines is a very positive one as vaccine rates continue to increase, and that has a corresponding uh impact on the economy, as economy begins to open up. And of course you you can trast that with what

Matt's experiencing in Germany and across Europe. Just you know, it looks like there's several months behind then of course the tragedy that's unfull thing UH in UH India just goes to the importance of getting folks facted up and and all through this process we've been fortunate to speak to experts such as Lauren Sour, the Associate Professor of

Emergency Medicine at the Johns Hopkins University. And I should not that the Bloomberg School of Public Health a Johns Hopkins is supported by Michael Arre Bloomberg, founder Bloomberg LP, Bloomberg Philanthropies and this radio and TV operation. Uh Dr Sour thanks so much for joining us here. I guess I want to go to the issue of what we heard recently from the CDC about mass and just you know, behavior, individual behaviors as more and more people get vaccinated in

this country. Do you think the messaging is matching what's really going on out there in society. That's a great question. I think there is a little bit of a disconnect. And there's also this sense of, um, you know, we're getting vaccinated, we're doing the work. Now, please let us get out there and get pick our masks off and be free, you know, and I completely understand that, you know, we we do want things to get back to normal.

I think, um, there could have been a little more explicit information in that updated CDC guidance on masking that we would have liked to see around, like office usage and things like that. But it is good to see the CDC acknowledging the safety of the outdoor space, especially as we move into summer and people are anxious to get out there to those outdoor restaurants, you know, outdoor settings, um and be with family members who are vaccinated or

friends who are vaccinated. Again. You know, it does seem like it's kind of silly to wear a mask outside to begin with, right, it seems very performative, like you're sort of stating your political opinion more than really trying to protect somebody because it's so unlikely to catch the

virus in an outdoor setting. Yeah, I mean, I think, you know, the guidance was catching up with the science, right, And so one of the most impressive things that has happened in the last year year and a half is how quickly science has happened and how we're rapidly trying to learn learn about all these different settings about aerosol transmission, about contact transmission, like everything about this virus is new when this pandemic started, and so we know that the

sort of regulatory environment and the policy environment has a lag. And so I think this is what we're seeing as policy and guidance catching up with the science and you know, the sort of exactly what you're talking about. The things we see we already feel to be inherent. So the science is there, the policy is catching up, and people can take advantage of that guidance and those recommendations. Uh, Lauren,

when do you think we'll know? When will the science come in about perhaps how long these vaccines actually work? Is it six months? Is at twelve months? Is it longer than that? And obviously that will go to what we do, you know, roughly a year from now. I know studies are being done. When do you think that science will be available? Yeah, I think it's already coming in.

I mean, I think we're starting to We're watching those first groups of vaccinies who are actually probably on their or dose from from the people who participated in the studies. So they're getting their boosters to see what they're um, you know, what they're waning intibodies look like and UM and that data, those data are coming in right That information is being gathered and analyzed right now as we speak,

which is really impressive. I think UM on the on the natural infection side, we're just starting to see that information from our earliest patients, So UM people who so generously contributed their time, their specimens, their clinical data, you know, and participated in those observational studies early in the pandemic and continue to participate UM or helping us to understand what happens after we get infected, or what happens after we get vaccinated, or what happens after we get infected

and vaccinated to our immunity. So I think, you know, this summer, we're going to start to see a lot of data pouring in on UM that first year of infection and what it looks like, along with the seasonality of the virus itself. We have a bloomberg opinion UM columnist Kathy O'Neil. She's also a mathematician. She wrote the book Weapons of Math Destruction. She says, like, you know,

people are ridiculously worried about this. Once you're vaccinated, and as many other people are vaccinated, as is the case in the US, these solutions are nine point and these are her numbers, nine nine nine nine percent effective. Are we being a little over dramatic at this point? Yeah, I'm not sure. I would say, I'm not sure where those numbers come from. I think, um, we know we have an incredibly a series of incredibly safe and effective vaccines.

Plus when you add these additional protective measures, as we get more and more of the population UM protected through vaccine, those numbers do increase. Right that her community starts to build UM. I think some new studies have come out just opink in the last couple of days showing that um AT they're just one dough if you have a reduction and transmission and a reduction in severity. So that's

also really exciting to see. But again. You know you want to wait for that cycle, that full cycle of participants early from the early studies to understand what does the ongoing picture of immunity and detection look like in the community. Absolutely, Lauren, thanks so much for joining us. Lauren sour there from the Johns Hopkins School talking about COVID. Let's turn to commodities here. I'm talking soft commodities like corn, soybeans,

wet sugarcane. All of these grands are making multi year highs. Let's get a look at underhood what's driving this. We welcome Sell Gilberti, President CEO, ce IO and co founder of two Creemp Trading. They trade these commodities South. Thanks so much for joining us here. I know our discussion is going to go supply demands. So where do you want to go first? As we think about these commodities setting some multi year highs, well, it is supplied demands.

So that's um, that's what's driving these highs. Basically, we are using more grains. In the case of corn and soybeans, we're using more grains two years in a row than we produce globally, and so that that's a very big deal. When you see stocks shrinking, your grain stock shrinking, Um, you get higher prices. That says any commodity. It is

simply supply to man. What's amazing is that soybean ending stocks and that means what's left over after you grow the whole crop and use everything you're gonna use, there's generally a little bit left. Um. Soybeans are down year on year. The projections corn. This is US US stocks corn down and weak down. This is the inventories inventories that's correct, excess inventories. And that's that's enormous UM. And that's why you've seen these these large price rises usually.

I mean, if you have these kind of price gains, I know, farmers like to go out and plant more. Are we going to see supply meat demand? Is? Is this, you know, the transitory inflation that Powell is talking about or these prices here to stay? I think these prices are here to stay for more than one season. They never you know, grains are easy to grow, um, but it does take a full growing season a year, you know.

So essentially, when when the the u f d A did kind of drop a bomb on the market in the last day of Marching their annual acreage report where they came in with much lower corn and soybean acres in the United States, and people anticipated we will raise that number a little bit, so you will see these balance sheet estimates that are really tight right now kind

of loosen a little. But the bottom line is even factoring in perfect growing weather um, which is a big f around the world, and we're just planning the seeds now that we're counting on to harvest in the autumn. Even with a perfect harvest and a and a good yield, we're still not going to rebuild these supplies. It's going to take at least until next growing season that's autumn in the Northern Hemisphere, in order to get these balance sheets back online. And that's assuming good weather. So did

the pandemic play any roll in this? It seems just like a big miss here on people's supply side models and demand models. Um, it's true. The pandemic was really confusing because right when it hit, we assumed we'd use a lot less corn for f F and all, and we did, but the the use of that has come roaring back. People panicked, particularly about the use of wheat. We thought, you know, no more cruise line and no

more casinos, no more big parties. And you know, a cruise line will get twenty tons of wheat delivered to it at a time on big palettes because they're making homemade breads and you know the hots and everything for their bars, and people panic. Well guess what, everybody went home and became a home chef. For a while. The number one search on the internet globally was for banana bread. And we actually used the quarter on quarters one of

those quarters last year. Yeah, there you go. And and we we use more wheat by one percent according to the Wheat Board or somebody, and and that's a really big deal. We're actually using more, that's the key. We use more grains. The combined use of corn, soybeans, and wheat everything all year and we've we've studied this back to nineteen is either a global record or they just missed.

So it's the second highest. It's always rising. So when you have these temporary supply disruptions like lower acres than you expected, like poor weather in Brazil for the for the second crop corn, these are big deals. And that's why we've seen this price appreciation, which should hold more than a year. I've learned more in the last year about different variations of wheat and flour than ever in my life. I've made bread for the first time in my life. I've made pasta for the first time in

my life. So you're you're spot on in terms of that, because I'm not somebody who ever spent time in the kitchen before. Are there any softs that um, where supply is just way too high and people didn't didn't use as much as we thought they would. Um, you know, nothing jumps out. I mean people are getting a little nervous about coffee. People that you know, there's enough sugar.

That's another interesting thing. The short answer, no, but they're in commodities, especially aggri cultural commodities, there's either enough or there's plenty. We don't ever run out because your price ration. You know, people don't starve because there isn't enough food in the world. They start because of other reasons, politics

and logistics. But so look at it this way. When you're having a birthday party at your house and for five people, and you bought the six inch round cake, that's great, and you have plenty and the doorbell rings and five more people come to surprise you when you look at that cake and you go, well, there's enough. That's what we're experiencing right now. There's either enough or there's plenty, and that's why the markets get nervous right away.

I mean soybeans in the US, we've gone from a forty eight day excess supply down to a ten day excess supply. That's that's unbelievable. Um, we only have ten days of soybeans left over at the end of this coming year, assuming a good crop and a good harvest. We all know about that. We all know about the lumber prices as well. It's a fascinating story as well. I have to have you back on in the future. Sal Gea Barty, thanks so much for joining us. He is the CEO of two Cream. Now let's talk a

little bit with Laura Martin. She's a senior analyst at Needham and Company, coming to us out of Los Angeles. And we've had some pretty big media companies out with earnings and coming out still this week among them. I know Paul has has done some work on a n R and found Laura, you are one of only five out of forty one analysts with an underperformed on Netflix um What disappoints you about the streaming service, Well, we

think that they're the fact that a monopolis. They invented the category, and so the people who are entering late, especially in the last twelve months, are doing much more innovative things around, like pricing strategies. For example, um Peacock has a free at three, five dollar and a ten

dollar tier. That's a pricing innovation. Bundling. We're like, Disney will give you Disney Plus standalone, but it will also bundle with um Hulu and with the ESPN for at thirteen dollars a month, which is a lower price than the Netflix standard price of fifteen dollars a month. And then we're seeing a lot more cross promotions with other types of assets. So I think there's just a lot more innovation going on in the streamers that came late

to the party. Where especially optimistic about Discovery Plus because David jazz Las said on his call that they're getting five dollars for the ad lite service and another five dollars from advertising, so they're actually getting ten dollars, which is more than they're getting for the ad free service, and it's more than they're getting on their linear TV network.

So that's actually the best economic model right now. But Laura, none of them have None of those others have Narcos, none of them have the Crown, none of um them have Ozark. I mean there are series on Netflix that you can't live without having seen, and everyone is waiting for the next season, right, No, disagree. I think con quality is necessary but not sufficient because HBO also has

that HBO Max and what content? What a lot of these guys now has live sports and if somebody needs to see the NFL, that is must be programming for them, much more important than the Ozarks. So I wish I could. I wish I could get HBO. I live in this small country of eighty million people, and HBO is not

available in Germany, but Netflix is. Hey, Laura, you know, actually, well, Matt, just to give you a sense, Laura has been right here on the next Netflix called the stock down five percent year to date versus calling on eleven or twelve percent gain for the SMP. So it's been a good call, Laura. We've also had some of the big internet companies report this week, and I know you've covered this space since its inception, and you have a great feel for the

the advertising market. We saw some of the big players like Google and Facebook really do well and put up some blockbuster numbers. But when you go to some of the smaller players like Pinterest and then last night Twitter, not so much. So are we seeing, you know, a

creation of a bifurcated digital ad market. We are the all of the big ad tech that I cover, which is Facebook, Alphabet, Amazon, and Apple, all of them over reported dramatically, UM and not only at the top line, they more even more dramatically overperformed usually over performance at the ets line. So what we're seeing is a continued consolidation of revenue into the big fangs, which are which are competing with each other with the best programmers around,

in the best innovation around. UM. I mean Twitter is I can't imagine counting Twitter among the others just because it's so small and so niche. UM. But in terms of the big ones, what's the concern? And I see you have a buy on um, Amazon and Apple, but on Facebook you have a hold, you have buy on Google. In terms of these big giant platforms, what's the regulatory concern? So I think regulatory we have a whole hold on

Facebook because we see the regulatory concerns most there. I think Facebook has sort of irritated everyone in Washington, d C. Regardless of what side of the aisle you're on, and and in part because I think those people are afraid for their jobs. I think they believe that Facebook moderates content to gause Republican voices, so our conservative voice is what's call it. So I think that that's actually an existential threat to those people's job security. So I think

it's most likely to be regulated. Um, I don't really worry that much about either Apple or Amazon particularly. My opinion is that every company sewing Apple, which is Spotify, and um Fortnite, which is Epic Games, and so Facebook

just picked a big fight with Apple, will lose. Apple will win because what Apple delivers is one billion unique users and a billion and they have six hundred million subscribers now, so the value they're bringing to consumers at a two thousand dollar price point is sort of second to none. So I leave their platforms will win every

regulatory battle. Laura, We've now got just about every one of the traditional media companies that you have long covered on Wall Street is now out with a streaming service. Is it too early to rank winners and losers? Is that reflected in your ratings? How do you think about some of the traditional media players as they try to to morph into you know, kind of streaming first stories, right, So what I would say is this, um, it isn't reflective.

So a the industry design at maturity. So let's call that five years in my opinion, will be three services in the upper left that have fifty or sixty million subs each, and those are all the broadcasters as their anchor, tenanted by the broadcasters who have live sports and live news and the pocketbooks to create live original content. So that's Peacock, Paramount Plus and CBS UM and NBC which is no, I'm forgetting one whatever the other broadcaster is,

I'm forgetting who it is UM. So those three are gonna win. I do not think Leftflix wins. And in the other quadrant we have specialty or let's call on passion streaming services. I would put Discovery Plus down there, and I put w w E down there in the surfing channel, in the History channel and brick Box. And so I think people on average will take four or five services, of which three are the general entertainment services and then the other you know, one or two per

house will be passion services. That's how I think it plays out in the end, and I and I would say, for sure our sell on Netflix tris like that, but I would say we should be probably more positive on Discovery. But this year they're going to have huge losses from peak spending on launching Discovery Plus and the Olympics, which

costs them like a fortunate when they have it. Also when I tried to subscribe to here but not available in Germany, these people need to do a little bit more work if they want to access a big market like this. But you don't think, Laura, that we're headed to. You know, somebody's gonna have the brilliant idea to bundle all these streaming services and make a set top set top box and then sell them all together like new cable. Oh I do. I think that's what I Sanity is

going to do. I think that's what Comcast will do, um, But I don't think that's what the consumer wants. Paul. The whole reason we debundle, the big big bundle is because people want the choice to individually subscribe for these all right, Laura, real quickly ten seconds. You live in Los Angeles, Walt Disneyland. Disney Land just open today, are you going? Yes, absolutely, as soon as I could get a ticket. They've raised prices again, but much lower attendance

is fabulous. There you go, Laura Martin, thank you so much. We appreciate that. Yeah. Absolutely, Laura Martin. She's a senior analysts that need to be company. She's been covering this media space mat for a couple of three decades and just been all over some of the most innovative research out there, as you know, exemplified by her cautious stance on Netflix. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts

or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller, pen on Falsewhinnie, I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio. M