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Dude, Where's My Cash?

The growing desperation for income
Friday, February 15, 2019, 6:44 PM

A few months back, we issued a report, The Primacy Of Income, declaring the end of the era of capital gains.

It's conclusion? Wealth accumulation over the next decade will be predominantly driven by income.

Since issuing that report, developments have only served to underscore that prediction.

Recession Dead Ahead!

The data signals indicating that the US and global economies are entering recession are multiplying faster than rabbits on Viagra.

Crashing retail sales, rising layoffs, falling consumer & business confidence, slowing service-sector activity, tightening bank lending, a 3-year low on the Baltic Dry Index, falling auto sales combined with spiking auto loan delinquencies, increasing credit card default rates -- these are just a small smattering of warning signs pulled from this week's headlines.

We dived deep into these figures and their repercussions in our detailed report, You vs The Recession.

Its key takeaway is this: the unrelenting year-after-year gains across nearly all asset prices that we've enjoyed over the past decade are done. Moreover, they're highly-likely to reverse into losses as the arriving global recession takes hold.

Couple that loss of appreciation with the job losses that accompany recessions, and the outlook is bleak for those looking to protect and grow their financial wealth over the coming decade.

Such conditions make investing for income (inflation-adjusting and tax-advantaged whereever possible) not just prudent, but imperative.

Dude, Where's My Cash?

Income enables investment and incremental value-creation. Without it, much less is possible.

For stark validation of this point, we only need to turn to Friday's news announcing Amazon's withdrawal from its plans to build a headquarters in Long Island City, Queens NY.

I'm not much of a fan of any of the parties involved in this debacle, so I'm not really sure there are any heroes in this story. But there sure are victims.

What's unequivocal is that New York (and the people of Queens especially) just lost a gigantic long-term future revenue stream.

The deal on the table before Amazon walked away was expected to bring in $27 billion in tax revenue to New York over 25 years, generating 25,000-40,000 new jobs at an average salary of $150,000. In addition, another 1,300 construction jobs would have been created during the 15-year planned build-out.

Whether or not this was the "absolute best" deal that could have been struck, it represented a staggering economic windfall for Queens -- akin to the cargo cults of WW2 when the US Navy would suddenly arrive on a remote island in the Pacific, flooding the tiny local economy with dollars.

It's extremely unlikely Queens will ever see another opportunity like this.

And with it now gone, the community infrastructure needs the politicians were championing during the negotiations -- fixing the subways, funding the schools -- remain. But now there's no river of new money to pay for them.

Without that income, so much less is now possible for the people of Queens.

Which is why as the politicians responsible for the deal's breakage are claiming "victory" over corporate overreach, the folks who actually live and run businesses there are reacting like this:

“Amazon’s decision to withdraw its plans for our region will go down as one of the biggest debacles in New York State history, and the elected officials who are responsible for this epic disaster should be ashamed of themselves for jeopardizing thousands of jobs and billions of dollars in tax revenue and should also consider resigning.”

Kevin S. Law, president and CEO of the Long Island Association

“The reason why this is such a disaster is not only the loss of jobs, but the loss of people perceiving New York as friendly to investment in the 21st Century economy. The collateral effects of Amazon coming were always great, and now the collateral negative effects of Amazon leaving may be even greater. With Amazon coming, New York was finally recognized as the equal of Silicon Valley as a place to invest in startups  and for its potential for creating more diversity in tech as a whole. Now that’s lost.”

Andrew Rasiej, board member of NY Tech Alliance and CEO of Civic Hall

“Instead [of bringing improvements to Queens, the Amazon deal] gets killed by the worst type of politics, and by a very vocal minority with no roots in this community. They weren’t from the neighborhood, and they got caught up in this movement, and on the wrong side of history."

Richard Wissak, taxi company owner

“You need jobs in this area, and they promised us jobs, and we were looking forward to them being here. And now?”

Joann Mezil, family shelter employee

All those New Yorkers -- politicians, businessowners and residents alike -- who were counting on all that could be accomplished with Amazon's $27 billion, suddenly find themselves looking at a substantially diminished future and wondering dazedly:

Investing For Income

For those looking to avoid a similar fate should portfolio losses or a pink slip suddenly threaten your financial well-being, investing for income offers some of the best protection we know of.

So, how does one get started?

Sadly, accustomed to the speculative approach marketed to us for so long by the financial industry, most investors are woefully under-educated in how to build a diversified portfolio of passive income streams (inflation-adjusting and tax-deferred whenever possible) over time.

If that sounds like you, don't stress.

First you can read our recent report, A Primer On Investing For Inflation-Adjusting Income, in which we detail out the wide range of prevalent (and not-so-prevalent) solutions for today's investors to consider when designing an income-generating portfolio. From bonds, to dividends (common and preferred), to real estate, to royalties -- we explain each vehicle, how it can be used, and what the major benefits and risks are.

We're not advocating that you rush to shove all your capital into income-generating assets immediately. In fact, we advise amassing dry capital while the Everything Bubble bursts in order to purchase income at much better valuations.

But we do recommend urgency in educating yourself on the science of income investing and in drawing up your target list, so that you can act intelligently and swiftly when the time is right.

To that end, we've launched a webinar series on Real Estate Investing, as that's one of the most time-proven ways for building investment income. Episode #1 is free to the public, and if you have yet to watch it, it's available below:

Episode #2, which focuses on the key steps of the real estate investment process, airs live on Saturday, February 23 @ noon ET. Registration is required to participate in that webinar (all those who register will receive a replay video of the event). To register for the webinar, click here.

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38 Comments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 182
Predicting the future of Real Estate

Hi Adam,

Thanks for the real estate seminar... on your recommendation I read 'Equity Happens' so it was nice to learn how Russ has updated his outlook since the GFC.

I am in a similar position to you, in that I rent my home. I understand that you are in this holding pattern while you wait for the everything bubble to burst, but we can not predict the future. The central banks have shown their willingness to print at the slightest whiff of deflation (e.g 2016), so what is to say they won't continue to succeed with this until such point as rampant inflation arises? This could be many, many years away given the global deflationary forces at play (technology, millions of new workers in India etc). In the meantime, why pay thousands in rent each year (a certainty) in the hope that RE prices will fall (a possibility)?

I only ask because I am in the same situation and am considering buying (though admittedly the housing market here in Dublin is not as hot as CA.... It is still below the 2006 peak).

As always, I appreciate your views.

Thanks, E

brushhog's picture
brushhog
Status: Bronze Member (Offline)
Joined: Oct 6 2015
Posts: 60
What a debacle for NYC

A debacle for NYC and the people of Queens. NY state supposedly has a shortfall of 3 billion a year. Amazon was supposed to generate over a billion a year in revenue, this alone could have closed up over one third of the entire state budget. On the other hand, they were already clamoring and fighting over how to SPEND the money instead of using it to balance their books.

So, in the long run they might have ended up with an even larger shortfall with the additional revenue. This is the problem with the concept of increasing revenues....it only digs governments deeper into the debt hole.

 

VeganDB12's picture
VeganDB12
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 764
NYC and amazon

How true. I heard rumors of people jumping into the Long Island City real estate market thinking they would benefit. It's a warehouse district they are trying to gentrify it seems to me. I felt sorry for the small speculators yesterday when the news came out.I feel bad for local workers who need jobs Still, as one article said recently they both got what they deserved...it was a squandered opportunity to just give amazon more breaks from our loca tax base so good riddance. 

brushhog's picture
brushhog
Status: Bronze Member (Offline)
Joined: Oct 6 2015
Posts: 60
Eannao wrote: Hi Adam, Thanks
Eannao wrote:

Hi Adam, Thanks for the real estate seminar... on your recommendation I read 'Equity Happens' so it was nice to learn how Russ has updated his outlook since the GFC. I am in a similar position to you, in that I rent my home. I understand that you are in this holding pattern while you wait for the everything bubble to burst, but we can not predict the future. The central banks have shown their willingness to print at the slightest whiff of deflation (e.g 2016), so what is to say they won't continue to succeed with this until such point as rampant inflation arises? This could be many, many years away given the global deflationary forces at play (technology, millions of new workers in India etc). In the meantime, why pay thousands in rent each year (a certainty) in the hope that RE prices will fall (a possibility)? I only ask because I am in the same situation and am considering buying (though admittedly the housing market here in Dublin is not as hot as CA.... It is still below the 2006 peak). As always, I appreciate your views. Thanks, E

Eannao,

Just my 2 cents here as a reader and real estate investor; I expect a recession and a drop in real estate prices over the next 3 or 4 years. IMO it will be worth the short term wait for the opportunity to pick up some value at reduced prices. Personally, if I were renting I would not wait too long. If Im wrong and the market doesnt depreciate within a couple of years, I'd be looking to buy anyway, especially as you do not own your home now.
 

richcabot's picture
richcabot
Status: Silver Member (Offline)
Joined: Apr 5 2011
Posts: 242
Emotion wins over logic

The emotional revulsion of giving tax breaks to the most "valuable" company in the world and its owner, the (currently) richest man in the world prevented AOC and her ilk from seeing the overwhelming benefits to NYC.   Decisions based on emotion rather than analysis rarely turn out well.

It is true that for many of the existing residents of the area it would have been a bad deal.  It would have been gentrification on steroids.  If you are a renter and have a job, having a bunch of high income people move in is not something good.  It will increase your rent and your chances of getting one of those high paying jobs is essentially zero.  You will be forced to move.

However, viewed by NYC and NY State as a whole it was a fantastic deal.  Massive tax revenue for a pretty modest tax abatement (it wasn't a cash payout).  That's another example of AOC's total lack of economic competence.  She talked about how the 3 billion should be spent on fixing the area rather than being given to Amazon.  There never was 3 billion to do anything with.  It was 3 billion of future tax revenue to be forgone, because there was supposed to be 27 billiion more behind it.

ezlxq1949's picture
ezlxq1949
Status: Gold Member (Offline)
Joined: Apr 29 2009
Posts: 325
Origin of these billions?

If I correctly understand the Amazon business model, its immense revenues arise in part from a combination of laying waste to vast swathes of small business, cunning schemes to pay as little tax as possible, and treating its employees as expendable helots.

On this basis I find it hard to accept how any community would take such an enterprise into its bosom.

Please tell me I'm wrong and if so, how and where.

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1785
Fear and loathing in Queens

I see a lot to like in NYC and its people, but I have nothing but contempt for all the main players in the Amazon/NYC debacle: Amazon, Dick Man Bezos, DeBlasio, AOC, Cuomo, the NYS legislature, the NYC city council, etc.  

A long time ago I read a book entitled, "Games People Play."  It describes one game called, "Let's you and him fight," in which a third party benefits from two others engaging in interpersonal conflict (such as a father in a tough second marriage with a rebellious teenage step daughter).  He gets the wife and her daughter fighting and gets the heat off of himself.  Brilliant!  This feels a little like that, except I didn't contribute to getting the conflict started between Amazon and NYC/NYS.  So I'm guilt-free.

I'm enjoying watching a whole cast of characters I despise fighting amongst themselves.  OTOH I'm sad for the regular people of NYC who will miss out on a new revenue stream to help solve their huge municipal problems.

brushhog's picture
brushhog
Status: Bronze Member (Offline)
Joined: Oct 6 2015
Posts: 60
The people of NYC get what they voted for

As a former NYC resident, I honestly dont feel bad for any of the players involved. Not NYC, not Amazon, and certaintly not the people of NY or Queens. How do you think OAC got there? How does Cuomo the gun grabbing democrat keep getting re-elected?? How does a guy like Diblasio become mayor? If you are a New York City resident, then this is what you voted for and, obviously, this is what you want.

fionnbharr's picture
fionnbharr
Status: Silver Member (Offline)
Joined: Sep 27 2012
Posts: 100
The More Things Change, The More They Stay The Same

I understand that this thread is in regard to the management of an investment portfolio, and that some of the information i've reproduced below may be considered somewhat like nailing jelly to a wall.

But we are, indeed, living in interesting times, and I do like to inform myself from where history has repeated itself, over, and over, and over again ...

A cleaned up section of Transcript from the Adam Curtis documentary : -

Hypernormalisation (2016)

We live in a strange time.

Extraordinary events keep happening that undermine the stability of our world. Suicide bombs, waves of refugees, Donald Trump, Vladimir Putin, even Brexit.

For those in control seem unable to deal with them, and no-one has any vision of a different or a better kind of future.

This film will tell the story of how we got to this strange place. It is about how, over the past 40 years, politicians, financiers and technological utopians, rather than face up to the real complexities of the world, retreated.

Instead, they constructed a simpler version of the world in order to hang on to power. And as this fake world grew, all of us went along with it, because the simplicity was reassuring.

Even those who thought they were attacking the system - the radicals, the artists, the musicians, and our whole counterculture - actually became part of the trickery, because they, too, had retreated into this make-believe world, which is why their opposition has no effect, and nothing ever changes.

But this retreat into a dream world allowed dark and destructive forces to fester and grow outside. Forces that are now returning to pierce the fragile surface of our carefully constructed fake world.

The story begins in two cities at the same moment in 1975. One is New York. The other is Damascus.

It was a moment when two ideas about how it might be possible to run the world without politics first took hold.

In 1975, New York City was on the verge of collapse.

For 30 years the politicians who ran the city had borrowed more and more money from the banks to pay for its growing services and welfare.

In the early seventies, the middle classes fled from the city. The taxes they paid disappeared with them.

So the banks lent the city even more money, but began to worry about the size of growing debt, and whether the city would ever be able to pay it back.

Then one day in 1975, the banks just stopped.

What happened that day in New York marked a radical shift in power. The banks insisted that in order to protect their loans they should be allowed to take control of the city.

The city appealed to the president, but he refused to help.

So a new committee was set up to manage the city finances. Out of nine members, eight of them were bankers.

It was the start of an extraordinary experiment where the financial institutions took power away from the politicians, and started to run society themselves.

The city had no other option. The bankers enforced what was called austerity on the city, insisting that thousands of teachers, policemen and firemen were sacked.

This was a new kind of politics.

The old politicians believed that a crisis was solved through negotiations and deals.

The bankers had a completely different view. They were just the representatives of something that couldn't be negotiated with the logic of the market. To them there was no alternative to this system.

It should run society.

One of the people who did understand how to use this new power was Donald Trump. Trump realized that there was now no future in building housing for ordinary people because all the government grants had gone.

He saw that there were other ways to get vast amounts of money out of the state.

Trump started to buy up derelict buildings in New York, and he announced that he was going to transform them into luxury hotels and apartments.

In return, he negotiated the biggest tax break in New York history, worth $160 million dollars.

The city had to agree because they were desperate, and the banks, seeing a new opportunity, also started to lend him money.

And Donald Trump began to transform New York into a city for the rich, while he paid practically nothing.

Finn

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 4 2014
Posts: 681
Unintended consequences?

Just reported this morning - the beauty of trade deals in a new globalized world. Be careful of the details - they can come back and bite you:

https://www.cbc.ca/news/politics/huawei-canada-china-fipa-1.5021033

kelvinator's picture
kelvinator
Status: Silver Member (Online)
Joined: Dec 25 2008
Posts: 242
25,000-40,000 new jobs at an average salary of $150,000?

'The deal on the table before Amazon walked away was expected to bring in $27 billion in tax revenue to New York over 25 years, generating 25,000-40,000 new jobs at an average salary of $150,000.'

I don't know what the best course of action for NYC should have been, since I'm not knee deep in all the details, but I consider all the information in this sentence to likely be a wild misrepresentation at best compared to what the actual eventual outcome would likely be - unless we're including Bezo's stock gains and bonuses as part of the income average, perhaps.  Apparently, Amazon just paid zero (actually got a rebate) in Federal taxes on $11 billion in profit - I think it's unlikely they'll be putting out billions per year in taxes to NYC, one jurisdiction.  Possible, but suspect, IMO.   Also, I expect subsidizing the multinational corp is probably really not the best use of public funds compared to providing subsidies to other more widely and equitably owned local ventures and co-ops.

I really agree with your point that it's important to fund jobs and income, Adam.  Funding a mega-corporation like Amazon that has relied on endless free Fed money to become a monopoly and is a primary conduit for burning through planetary resources via peddle-to-the-metal consumption fueled by the insane 'endless growth' paradigm may not be the best option available.  Their near zero profit, (all reinvested or put out in bonuses and ponzi stock ramp) triple digit P/E is going to crater over the course of the 25 years under discussion.  Likely better to find and support other approaches to generating sustainable income, I'd say.

newsbuoy's picture
newsbuoy
Status: Gold Member (Offline)
Joined: Dec 10 2013
Posts: 361
Fa'get Abowd it! Go get ya big brudda next time.

Always fun to read here the reactionary peanut gallery, turning their "economic" scrupples in-side-out to justify a leo-liberal scam. LOL. Sad to see folks here falling for it. I expected more but am not surprised that out-of-towners don't get why the Amazon deal was not a good deal and a bunch of bull. Seriously, listen to yourself on this issue compared to others. You just accept the numbers as if they live in an alternate universe (alt-right?) Your falling over your own logic (and I pray and hope not revealing deeper biases). Ya know wad I'm say'n?

https://www.nytimes.com/2018/11/14/opinion/new-yorks-amazon-deal.html

Michael_Rudmin's picture
Michael_Rudmin
Status: Diamond Member (Offline)
Joined: Jun 25 2014
Posts: 1022
What's $150k? I am minded of Twin Tower payouts

if I understand correctly, NYC has about eight times the average cost of living of typical America. so $150k would be like an average salary of less than $25k anywhere else. At such a salary. people couldn't afford to live --they'd definitely need subsidies.

 

I don't think the Amazon solution sounded like a help, much less a solution. What it sounded like was a distribution center subsidized by an already-foundering city.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5860
peanut galleries

Always fun to read here the reactionary peanut gallery, turning their "economic" scrupples in-side-out to justify a leo-liberal scam. LOL. Sad to see folks here falling for it. I expected more but am not surprised that out-of-towners don't get why the Amazon deal was not a good deal and a bunch of bull. Seriously, listen to yourself on this issue compared to others. You just accept the numbers as if they live in an alternate universe (alt-right?) Your falling over your own logic (and I pray and hope not revealing deeper biases). Ya know wad I'm say'n?

No.  I don't know what you are saying.  Well, I do know that you seem to enjoy name-calling a whole lot.  That's pretty clear.  You also don't provide much in the way of facts at all, just your opinion, along with the name-calling.  Might you work in the news business, perchance?

I don't know anything about the Amazon deal at all.  My mind is open to be convinced.  I'd love to hear a fact-rich piece by someone who laid out the economic case as to why it was a bad idea.
Case 1: Amazon comes.  Things work out.  Expected tax revs, giveaways, effects on community.

Case 2: Amazon comes, but things aren't quite so good.  Expected tax revs, giveaways, effects, etc.

Case 3: Amazon doesn't come.

I guess that's not the kind of work you do, though.

aggrivated's picture
aggrivated
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 584
Alexa(ndria) is not in my community

Dave and Newsbuoy

I appreciate your approaching tete-a-tete. IMHO, and I am not often right, Newsbuoy is goading the discussion to look at how Amazon's business model fits into the Peak Prosperity paradigm. I am no fan of AOC nor of Amazon's business model. However both seem to be leveraging public fears, desires and weaknesses at the cost of leaving a trail of either burned out money value or burned out planetary resources. Neither is an acceptable alternative.

 

 

timeandtide's picture
timeandtide
Status: Bronze Member (Offline)
Joined: Apr 3 2010
Posts: 68
Amazon business model

The business model is a long way from proven, although the damage to communities is very real. Amazon has mostly been making its profits from data storage.

Many people have jumped on the Amazon bandwagon by setting up businesses to sell stuff and using Amazon to supply and sell. Many of those businesses are left with large amounts of useless unsold inventory.

If a downturn is coming that situation will only get worse. Retail is in all sorts of trouble - don't for one moment think that the problem is just in the malls. They, at least, can drop their skyhigh rents. Amazon has massive infrastructure of automated warehouses. We don't really know the reasons that Amazon pulled out but it may be that Amazon is taking a different view of the future.

All the talk about New York giving up on $27 billion of revenue fails to mention that the revenue stream is a forecast only. Economic forecasts do not have a good track record over 5 years - over quarter of a century such a forecast is just a reflection of the current complacency.

New York also saves on the $3 billion of subsidies to Amazon. What an incredible idea - a corporation that has cracked the $1 trillion stockmarket valuation level requires a city and its taxpayers to subsidise it on the basis of an easily broken revenue promise.

The regulators at last are taking a closer look at corporations like Amazon, Google and Facebook which have all the hallmarks of monopolies and side effects which have society wide outcomes that cannot be simply brushed away as disruption, as if disruption is always an entirely good thing.

New York may have reason to be grateful for the success of the activists.

 

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2268
Eannao wrote: I am in a
Eannao wrote:

I am in a similar position to you, in that I rent my home. I understand that you are in this holding pattern while you wait for the everything bubble to burst, but we can not predict the future.

I have come into a fairly serious wad of cash out of completely unexpected nowhere (proverbial rich aunt/uncle-ish story, benjis from heaven).  It makes me nervous just to see it in my bank account.  When I say that, I'm not kidding.  After a decade here, hawking every opportunity/threat and sliding underneath the wall of worry so many times because I didn't have enough capital/things to keep me up at night?  I'm stoked...*and* I sometimes now wake up at 3 am and loop on worry about the $.  Which is unacceptable.

I'm going to invest in RE at the first reasonable opportunity, without creating a stampede.  Have a relationship with a realtor, she has the specs on what I'm looking to buy.  Soon as it comes up I'm buying.  Turning 0101010s into something real.  I'm guessing before the end of the year, although like I said I'm not going to buy just to buy.  Looking for an opportunity, but sure as shootin I'm not going sit and wait for the market to drop X% or for QEinfinity or UBI or whatever is coming after the 2020 election.  Not going to get too clever and try and shoot the moon.

The whole financial world feels like a small door, and too many people with lots of 010101010s.  When the music stops playing, I intend to already be sitting down.  So I missed out on the last 8% of the market correction.  What's 8% of 010101010?  I forget.  

I may occupy, I may rent for a little income.  But my bank account will once again be safely in the low-5-digit range and I'll have a *thing* that can't be bailed in.  A thing that earns money or that I can live in.  And I can sleep at 3 am again. 

Money is weird.  The more you have, the more it owns.

VIVA -- Sager

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 6110
My Take on Amazon

I've read points and counter points on the Amazon/NYC thing and I cannot find a clear villian.  So I guess I'll give both sides a pass, or cast a pox on both houses.  Either or, or both.

However I am glad for the people who will be working at Amazon who now don't have to live in NYC.

I am heavily biased against NYC, mostly because I find it unacceptably dirty ("it's like living on the bottom of a birdcage"), overly stringent on government graft and excessive rules, a terrible housing shortage, and with a horrible infrastructure situation. 

Why would anybody want to live there when there are other places that could offer lower taxes, gentler government, with newer infrastructure and room to spread?

But mostly, the Amazon story is dependent on BAU continuing forever, and for the anti-trust arm of the (in)Justice dept remaining asleep forever.  Neither is a good bet IMO.

I wouldn't take anything more than a 3 month projection at this point...  ;)

 

dcm's picture
dcm
Status: Silver Member (Offline)
Joined: Apr 14 2009
Posts: 230
Clear Villains

AS a former prosecutor I find most villains to be opaque. Except the really stupid ones. Maybe it’s wrong but I’m finding a dark comedy in all this. Do we trust trillionaire Jeff? Let’s ask the wife. Do we trust a town that breast feeds the bankers. What a milky mess. Chaos theory might give us some answers. No one and nowhere to turn to. No one trusts anyone. No one can predict anything. Everyone’s lying about the numbers And yes, the biggest vertical monopoly ever constructed .. in the SECOND most corrupt town.  

Matt Holbert's picture
Matt Holbert
Status: Silver Member (Offline)
Joined: Oct 3 2008
Posts: 161
Real Estate May Shift Dramatically and Investors Should Know...

what will be desirable. Based on what I am seeing in my immediate heighborhood, investors should know that there is a trend towards multi-generational, single-family (according to code) homes. I live in what used to be a fairly basic middle-income neighborhood. It is now changing before my eyes even though I've only lived here for 2.5 years. The house across the street was occupied by 2 women -- a mid-late 80 year old and her daughter -- when we bought. The older woman died and the estate put the house on the market. The house was eventually bought by a family that currently has at times as many a three generations living there with one couple likely trying to make it four. (The home went from one car in the driveway to 7-8 vehicles everywhere.) Within 3 houses on either side of us there are 3 multi-generational households. 2 with disabled offspring (adults) and 1 with a father living with his son or daughter. Although multi-generational housing has been around for generations in ethnic neighborhoods it has traditionally not existed in most middle-class neighborhoods.

Multi-generational housing -- even in a single-family coded neighborhood -- will become the norm as the middle-class gets squeezed. Disabled children will become more likely as we continue to use GMOs, pesticides, and herbicides that should have all been rejected through the wisdom of the precautionary principle. 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5860
My Amazon Perspective

In a recent interview with Richard Dolan, CAF talks about the missing money and a bunch of other things.  But buried in the interview was her oft-made observation about how the theme of Mr Global's operation: centralizing profits. 

And that's what Amazon has done.  They've centralized the profits.  Same with Google.  Same with Facebook.  Same with Wal-Mart.

The net effect is to strip customers and profits from local businesses, and turn what used to be small business owners with agency into cogs working for The Big AI Machine.

If we project this forward, in 20 years, Amazon will have turned into The Company Store, and it will have destroyed local retail, and it will also be in position to strip profits from all the providers of the actual products, since Amazon will utterly control the delivery channel to the customer.

In this situation, product-providers will have to pay some variable percentage of their profits to Amazon, the only channel that remains in existence.   Amazon's AI will calculate what you must pay with unerring accuracy, since it will know your balance sheet and income statement, and the AI will leave you just enough profit to limp by.  They will also personalize prices to the customer - because they know just how badly each customer wants whatever-it-is.  Like facebook, Amazon (Alexa!) will know you better than your mom.  The Amazon AI will be fantastically good about stripping the maximum amount of profit from both ends of the chain, handing it over to Jeff Bezos.

Oh and Bezos, Richest Guy In The World, owns his very own propaganda site, The Washington Post.  I suspect this is just the first site of many.  Perhaps the New York Times will be next.  Or maybe CNN.

Clever fellow, Bezos.

To my mind, Amazon needs to be taken down.  It is way too powerful.

So while I suspect New York probably missed out on a reasonably big gravy train, the larger question is, should such a gravy train even exist?  For me, the answer is no.  New York already has one such gravy train - the collection of banksters downtown - which it assiduously protects from harm.  Armstrong goes on and on about how you can't hope to win any sort of lawsuit against the banksters in any New York court.  He should know, he's had personal experience.

Anyhow, that's just my Amazon Thought For The Day.

I humbly submit a new tagline for the Bezos WAPO:

"Democracy Dies When The Press is Owned By The Oligarchs".

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thc0655
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Gee, Dave

That was pretty dark (can’t disagree with anything you said). Please give us some humor to relieve the stress when you hit the dark nails on the head like that! We can always hope for an EMP to destroy Amazon’s business model and renew our need for local merchants and producers.

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Waterdog14
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Amazon's distribution centers

Amazon's headquarters may pay high salaries, but remember that the workers in their distribution hubs are 'enslaved' by an exploitative system that pays very little and offers no job security:

Elwood, Illinois (Pop. 2,200), Has Become a Vital Hub of America’s Consumer Economy. And It’s Hell.  

I resolve to buy fewer things on Amazon.  Shop locally.  Support small business.  But. It's. Just. So. Darn. Easy. to Click...

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davefairtex
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Dynamic Pricing

Back in 2000, Amazon experimented with an embryonic "dynamic pricing" project that charged people different amounts for a DVD, based on who knows what - zipcode, shopping habits, etc.  Consumers spotted this, got annoyed, and so Amazon backed down and allegedly issued refunds to all their customers who were overcharged.

There are lots of firms that engage in "dynamic pricing" today.  If they can identify you as a rich customer who is price insensitive, they're going to gouge you worse than a tuk-tuk driver in Bangkok.

Mac users may well be charged more than Windows users, for instance.  Frequent fliers are charged more than occasional travelers.  (Ah, the benefit of being a repeat customer - whose data the airline already has). 

Seriously.  The only way to survive such indignities is to have a single-use browser session that strips as many identifying marks out of its signature as possible, with your connection made via VPN, preferably appearing to originate from some poor neighborhood in East Bupkis, NJ.  Of course if you have to log in to provide delivery instructions, they've got you.  Or - in the future - when Amazon owns retail, you simply won't have an alternative.  By then, even bricks-and-mortar (Amazon "GO", naturally) will have "digital price tags", where the store recognizes you using face recognition (plus your phone's digital emissions signature), changing prices as appropriate in real time as you wander around, to match your ability and/or willingness to pay.

Once they own retail, there won't be much you can do about it.

Centralizing profits.  Mr. Global.  That's the risk anyway.

https://medium.com/syncedreview/ai-powered-dynamic-pricing-is-everywhere-4271a9939d11

A different and more controversial angle in dynamic pricing is setting different prices for different customers. Many major E-commerce companies prefer not to disclose whether they do this, or may do it discreetly, as the practice can be regarded as a form of discrimination pricing. It’s not unusual for example to see a different price for a travel package when visiting a booking website on your laptop versus the price displayed on a friend’s computer, or even on the booking company’s app on your smartphone.
 
 Online retailers’ dynamic pricing systems build and respond to individual users’ pricing profiles, which can be based on their zip code, device type, the type of products they have browsed and ordered, and other data. Like a savvy car salesman, sellers endeavor to size up the customer to determine how much they can afford; it is thus natural to set a higher price for those who can be expected to pay it. 
 
 Back in 2000, Amazon was found to be charging different people different prices. The company apologized and promised it would not set prices based on customer demographics. However even if pricing remains consistent on a specific product, there are other variations that can create personalized pricing scenarios:

  • Create different pricing tiers tailored to different customers
  • Customize product bundles based on users’ pricing profiles
  • Target different customers with different product suggestions at different prices, etc.

Such subtle adjustments in presentation and pricing, augmented by algorithmic dynamic pricing, can also result in some shoppers paying more than others, which benefits the seller.
 
 The expansion of sales platforms using dynamic pricing is making it increasingly difficult to detect potentially unfair pricing schemes or protect oneself against them. Consumers would do well to apply the age old “caveat emptor” not only to the product they are purchasing but also the price tag it carries — even if one’s wits alone will not unravel the mystery and complexities of algorithmic dynamic pricing.

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nickbert
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Money flows to where it's best treated

I don't really understand what the downside was for the NYC / Amazon arrangement. The local gov't wasn't PAYING Amazon any money to move there, just offering low tax incentives for doing so, right? So it's not like the gov't had to foot the bill for any of it, only accept a smaller (or delayed) ADDITIONAL stream of tax revenue from the new arrival. But Amazon's employees, suppliers, and local businesses that would benefit from it would in turn be producing more tax revenue for the local gov't as well. Tax revenue that would otherwise never be realized, given no other company or entity is considering such a massive investment in the area. Surely it would be more than enough to cover any additional expense related to city infrastructure (since the area is for the most part developed). And the placement of a second HQ there isn't the same as a Walmart for example that competes directly with a lot of the local businesses. Perhaps there's some clause in the agreement that really does put the city at an economic disadvantage compared to where they are at now, but I haven't seen it yet.

Now I DO have big reservations about Amazon itself... if nothing else I think it's too big and overly large entities typically lead to centralization of power & wealth. And their big Web Services contracts with the Intelligence Community?... surely nothing bad will come about having a monolithic entity that deals with data on millions of people also being involved in domestic and international spy activities! indecision But I think that should be a separate issue from the HQ question, and from a purely logical point of view I don't understand the level of resistance to Amazon's presence there. And I can't really fault Amazon changing it's mind. As I put in the subject, "money flows to where it's best treated". You don't want to hand a company the proverbial keys to the store to attract them to move in, but if you don't present a business-friendly environment (i.e. lower taxes and REASONABLE regulatory policies) they (and their money) will go elsewhere.

Viewing it from afar here in Asia, the situation seems more like a class-warfare game than anything else. The earlier reference here to "Let's you and him fight" by THC seems spot on to me, and is likely just priming the pump for "Stick it to the evil rich" future policies. I understand the danger of wealth inequality, but attacking the symptom and not the root cause is going to hurt a lot of innocent people... poor, middle-class, and rich alike.

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brushhog
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No, NY did not "save" 3 billion..

Just to clear up a big misconception that I see being expressed quite often; NYC was never "giving" Amazon any money. They were offering tax breaks that supposedly totaled 3 billion [ though I have read it was more like 1.5 ]. 

The problem is, people on the left have started calling tax breaks "subsidies" in an effort to cloud the understanding of their followers. Ive heard it often repeated by those that champion higher taxes that tax reductions are "give-aways" that have to be "paid for". This kind of talk started about 12 years ago. It's part of a strategy of framing all money as belonging to the government, which lets you keep some at it's own "cost".

In reality there is no extra 3 billion now in NYC's coffers. They never had the 3 billion. The 3 billion they were "giving" Amazon was Amazon's own money that they were gratiously allowing them to keep. Dont get me wrong, I dont believe Amazon should get ANY breaks that the rest of us dont get. I believe in a free market where government agents do not intervene to pick the winners and losers. That being said, all this talk of tax breaks being "subsidies" has lead alot of people to be confused [ and thats the whole purpose ] about what is really going on.

Heres a basic analogy of what's going on and the convoluted mentality of some people regarding this situation;

I am going to rob 100 dollars from you. Now I just gratiously changed my mind and have decided not to rob you after-all. There, I just "gave you" 100 dollars! Now how am I supposed to pay for that money I just gave you?? These "subsidies" are unfair...I'm not sure I can afford them. 
Now you have grown tired of my BS and have left town...great! I just "saved" 100 dollars. Money I didnt take from you which was costing me 100 dollars. Not robbing you was "costing" me a fortune!

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davefairtex
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saving 3 billion

Some good clarifications on the "missing 3 billion" that NYC allegedly "gave" to Amazon.  Which they clearly didn't.

However.  Let's assume the following scenario:

There are currently enterprises already in place that are paying taxes to the city - they weren't "cool" enough to get special treatment.  Then Amazon comes in and displaces them.  But Amazon doesn't pay any taxes.  So the city no longer receives revenues from the displaced companies, and doesn't receive revenues from Amazon.  That would seem to leave a hole in the city budget, while the city retains the same cost structure for police, fire, road repair, etc.

It probably isn't a $3 billion hole (since Amazon's taxes would definitely be larger), but a hole nonetheless.

My earlier question amounted to: how would the city expect to fill that hole.

And one last semi-snarky observation:

To those quasi-libertarians who don't believe government should be doing things like this, consider: there is a "marketplace" of cities out there, and each city is acting to compete in this "marketplace", and so offers like this to companies are just an example of a different sort of free market at work - offering "location & tax products" to their mega-corp "customers."  Its a viewpoint, certainly.  :)

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mntnhousepermi
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what would it have displaced ?

From what I understand Amazon was making its HQ in an area that didnt have much going on.  It wasnt going to take up a building in the financial district, for instance.  So, if it displaced empty building, or buildings falling apart rented out for very low economic uses, which is the case and why the area went for the deal, it was not displacing other good tax-income payers to the city.

davefairtex's picture
davefairtex
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displaced

I don't know what it would have displaced.  Presumably that's what would have been in the economic analysis.  But even if its just a vacant lot, the owner pays a property tax on the lot, which (presumably) Amazon wouldn't have to pay at all.  I just assume the amount of tax being paid currently is non-zero, and it would be replaced with zero, which is what Amazon would have paid.  As I understand it.

And, also presumably, the wear and tear on the roads from all those new people is an added cost, as is the number of firemen and police they'd need to add to the area.  With no direct offsetting taxes.  So it is a hole.

I just don't know the numbers; who wins and who loses.  State of New York would have been a winner (increased state taxes, and presumably increased sales taxes), so they're pissed.  Property owners near the site: huge winners, also pissed.  Renters in the area?  Big losers, probably relieved.  Local restaurants?  Big winners: pissed.  And so on.

 

 

newsbuoy's picture
newsbuoy
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Be Careful What You Ask For

Oh dear,name calling Dave, none of that going on here or in your texts. You're more of a shaming kinda guy. A true gentleman. Fact rich you say?

https://www.yanisvaroufakis.eu/2019/02/19/utopian-science-fictions-legitimising-for-our-current-dystopia-2019-taylor-lecture-oxford-university/

 

mntnhousepermi's picture
mntnhousepermi
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nope, not zero
davefairtex wrote:

I don't know what it would have displaced.  Presumably that's what would have been in the economic analysis.  But even if its just a vacant lot, the owner pays a property tax on the lot, which (presumably) Amazon wouldn't have to pay at all.  I just assume the amount of tax being paid currently is non-zero, and it would be replaced with zero, which is what Amazon would have paid.  As I understand it.

And, also presumably, the wear and tear on the roads from all those new people is an added cost, as is the number of firemen and police they'd need to add to the area.  With no direct offsetting taxes.  So it is a hole.

I just don't know the numbers; who wins and who loses.  State of New York would have been a winner (increased state taxes, and presumably increased sales taxes), so they're pissed.  Property owners near the site: huge winners, also pissed.  Renters in the area?  Big losers, probably relieved.  Local restaurants?  Big winners: pissed.  And so on.

 

 

 

Amazon ws never going to pay zero taxes  " ... De Blasio and Democratic Gov. Andrew Cuomo said the $2.8 billion in tax breaks and subsidies they were offering Amazon would result in $27 billion in tax revenue..." and this is over a number of years, not all in one year.  And, yes, it was part of the economic analysis by the rea which is why they WANTED Amazn there.   27 Billion in tax revenue.  Way more than unused warehouses it would have displaced.  This is all easy to look up.  

 

Police and roads and infrastructure would have all been big winners from this.  Yes, it would lead ot some run down housing replaced with new renovated housing.  But, with so much new tax income they could have easily mitigated that

Adam Taggart's picture
Adam Taggart
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Posts: 3309
More Blowback In NYC

The past few days have seen a wild tit-for-tat in the media/twitterverse as the disparate players in the NYC/Amazon melodrama flail about trying to finger a scapegoat.

The anger amongst the populace of NYC/Queens appears predominantly directed at the politicians who skunked the deal -- a deal roughly 70% of New Yorkers were in favor of (with minority voters -- and Queens residents specifically -- polling as most in favor)

The latest salvo in this mudslinging-fest comes from the Job Creators Network, which just put up this billboard in Times Square:

Alexandria Ocasio-Cortez is getting some negative reviews in her home city.

Fresh off helping drive Amazon’s planned headquarters out of New York City, the rising Democratic star has inspired a billboard in Times Square.

“Amazon Pullout, Thanks for Nothing, AOC,” the billboard, located on 42nd street near 8th Avenue, reads.

The high-visibility blast is funded by the Job Creators Network and will be up for all to see until next Wednesday.

“The Amazon pullout is a perfect example of what we’ve been saying: socialism takes and capitalism creates,” Alfredo Ortiz, JCN president and CEO said in a release on Wednesday.

“The economic consequences of the HQ2 termination gives America a small taste of the harm that is to come if Ocasio-Cortez’s anti-business canon comes to fruition and is made federal policy.”

(Source)

It's increasingly looking like those responsible for scuttling this deal will be remembered as the villains, not the heroes.

aggrivated's picture
aggrivated
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AOC will need a thick hide

if she gets any traction with the Green New Deal. This Amazon deal skunking is just practice.

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davefairtex
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still waiting

Oh dear,name calling Dave, none of that going on here or in your texts. You're more of a shaming kinda guy. A true gentleman. Fact rich you say?

Yeah, I'm still waiting for you to include any sort of data at all in your posts.  But I am happy that you 'fessed up to all the name-calling.  Saying "oh gosh, you do it too" - such an accusation, whether accurate or not - tacitly admits the truth of my claim.  So I do appreciate your honesty.  Thanks.

But I'm still waiting for data.

I know, I know.  Data takes work to collect.  Its just tedious.  And data is open to interpretation.  Opinion is ever so much easier to generate.  That's probably why the "news people" engage in opinion-generating these days.  Its so much less work.  And it makes it more difficult for the readership to think for themselves.

And maybe that's the goal.

davefairtex's picture
davefairtex
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not zero

mntnhousepermi-

Amazon ws never going to pay zero taxes  " ... De Blasio and Democratic Gov. Andrew Cuomo said the $2.8 billion in tax breaks and subsidies they were offering Amazon would result in $27 billion in tax revenue..." and this is over a number of years, not all in one year.  And, yes, it was part of the economic analysis by the rea which is why they WANTED Amazn there.   27 Billion in tax revenue.  Way more than unused warehouses it would have displaced.  This is all easy to look up.

It turns out, it isn't all that easy to look up, because (as I understand it) the deal was just an MOU whose terms weren't yet finalized.  Here is what "curbed.ny" had on the deal (though I had to go to the wayback machine - the article is now 403'd):

  • Amazon will build a campus of at least 4 million square feet near the Anable Basin on the East River waterfront, on a site that’s partially owned by Plaxall Realty and partially owned by the city. But rather than going through the city’s extensive land use review process, known as ULURP, the state will take the lead and override local regulations on the lot, currently zoned for manufacturing space.

  • Amazon will receive $897 million from the city’s Relocation and Employment Assistance Program (REAP) and $386 million from the Industrial & Commercial Abatement Program (ICAP). It will receive an additional $505 million in a capital grant and $1.2 billion in “Excelsior” credits if its job creation goals are met. That brings the total amount of public funds granted to $2.988 billion—in other words, the city and state will pay Amazon $48,000 per job.

  • Amazon could also earn even more tax breaks separate from the city and state subsidies: The census tract in Long Island City where HQ2 (or HQ3) will be built is designated as an opportunity zone under a provision of the so-called Tax Cuts and Jobs Act, the tax overhaul President Trump signed into law almost a year ago.

  • Amazon will also lease 1 million square feet at One Court Square, also known as the Citigroup building; the banking firm will vacate its space in 2020.

  • In order to fund local infrastructure, Amazon will utilize the city’s PILOT (payment in lieu of taxes) program, estimated by Deputy Mayor Alicia Glen at $600 to $650 million over four decades; the specifics of how those funds will be allocated will be decided upon via community engagement.

Now then.  Take the $897 million from REAP.  The article makes it sound like cash.  Is it?  No.  It does mean they won't pay taxes to NYC for some length of time.

https://www1.nyc.gov/site/finance/benefits/business-reap.page

  • The credit may be taken against the following:

    • NYC General Corporation Tax (GCT)

    • Banking Corporation Tax (BCT)

    • Unincorporated Business Tax (UBT), and/or

    • Utility Tax

PILOTs: they spend money instead of paying property taxes.  Amazon spends the money though, they don't receive it.

ICAP: that's a program where you don't have to pay property tax for a period of time if you build or renovate:

https://www1.nyc.gov/site/finance/benefits/benefits-industrial-and-commercial-abatement-program-icap.page

This program provides abatements for property taxes for periods of up to 25 years. To be eligible, industrial and commercial buildings must be built, modernized, expanded, or otherwise physically improved. ICAP replaced the Industrial Commercial Exemption Program (ICIP) which ended in 2008. Previously approved ICIP benefits were not affected.

Property taxes zeroed out?  Its not clear what an "abatement" really means.

Here's another article which has a better breakdown.  There is one key table in particular I liked.  In the table, only one of the line items appeared to be a cash grant to Amazon: "capital grant" for $325/$505 million.

https://cbcny.org/research/breaking-down-amazon-hq2-deal

The only cash Amazon would get comes from the following:

Unlike the Excelsior tax credits, the capital grant to be provided by Empire State Development (ESD) is fully discretionary. The grant will reimburse Amazon for capital costs of office build out at $75 per square foot, up to a maximum of $480 million, and costs of site preparation and infrastructure improvements up to a maximum of $25 million, for a total of $505 million.  It will be paid over a period of up to 15 years.

The incentive proposal includes a schedule of grant disbursement that ties it to the same cumulative job creation and annual investment commitments as the Excelsior credits. If Amazon creates 25,000 jobs the capital grant can reach a maximum of $325 million. If job creation reaches 40,000 by 2033, an additional $180 million will be available, bringing the total to $505 million. (See Table 1.)

Amazon gets $500 million to construct themselves a building.  That's nice work, if you can get it.  Its not $3 billion, as some were saying, but it is $500 million, in cash, paid over 15 years - $33 million/year.  That's $75 psf cost.  Supposedly, NYC office space construction costs are $575 psf.  So while Amazon would get a cash grant, its only 13% of the total construction cost they can expect to pay.

https://therealdeal.com/2019/02/07/construction-costs-continue-to-climb-in-nyc/

Hmm.  I guess you were right: it wasn't all that difficult to look up.  Fortunately that "cbcny" group did a study.

https://cbcny.org/

newsbuoy's picture
newsbuoy
Status: Gold Member (Offline)
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Posts: 361
Who Are The Snow Flakes Now

SHould I post this? should I not post this, do I really give a flying fluctuation? (what'da hell)

Look! sorry if you guys can't take a joke, peanuts in galleries, whatever. Good thing you don't live in NYC. Oh and BTW where do you think Trump learned to be a mob boss? Yeah, dats right. The Giulliani, orchestrated the take-over years ago. (what do you think replaced the Five Families?)

Bezo probably just avoid a fate worse than death with his thumbs attached. And yeah, another thing, you can't believe everything you read in the papers! LOL (Trump didn't invent that either he just took it over to amuse the moans).

Right, the Section 8 tenents in Queens decided to put up a sign in Madson Sq Garden, riiiiiiight! They're so upset.Who's got that kinda stash? The same mob Trump slithered out of.

When did you guys give up on a little thing called de-mock-rah-see. How can the morons in Queens be upset if no body and I mean NO BODY was involved in the deal. City Council? screw'm District board, screw'm, voters, who?

You can squeeze your cheeks all you want around imaginary "facts" and promises, but when have these guys ever followed through on those promises. What, suddening you are believers?! They are long gone by the time folks get the notice they're getting evicted the rent just triplede and a nice geekie looking neutra-sexual wants your apartment. These are mean streets so get your heads into the gutter if you want to understand whats at stake for New Yorkers. Disclaimer: thanks to Giulliani and Bloomberg this place has already turned into a Disney reproduction of Cinncinati with Wall St and Broadway, where you can see such gripping plays as King Kong, bring da family.

(Gotta keep the chumps paying,and most importantly, I'm the biggest chump of them all, I believed) No more! Got my yellow vest ready to go, along with the three G's.

BTW any one of you'z want to guess how many phantom employees worked on that new tunnel between Queens and Manhattan? its a big number... What you look'n at!

Cheers!

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davefairtex
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Posts: 5860
translated

So, uh, I guess you're saying that renters would have been one of the losers in the big Amazon deal.

I'm pretty sure I said that too.  Yay, we agree.

kelvinator's picture
kelvinator
Status: Silver Member (Online)
Joined: Dec 25 2008
Posts: 242
Anti-AOC Times Square Sign by Repubs, Not by New Yorkers, BTW

Again, while as I said, not a big fan of the planetary consumer/depletion and stock market ponzi model Amazon represents and enables, I'm not enough into the now theoretical details to know whether I would think it would have been good deal for NYC or not if I'd had to decide - which no one does now. 

As always, it's worth following the money for information sources.  The HarrisX poll Adam quotes showing 70% support for the deal was commissioned by Amazon.  Commissioning a poll doesn't mean the poll is biased, but if you look at poll differences over time, that often seems to be the case.   Here, it's worth noting that another poll from the Siena College Research Institute found that 56% of New Yorkers support the deal - still a solid majority, but not nearly as impressive.

On the Times Square sign, as Adam notes, that was put up by the Job Creators Network (guess which party they tend to agree with), whose CEO Alfredo Ortiz, according to their website:

"was instrumental in helping pass the historic tax cuts bill of 2017. Working with former Speaker of the House, Newt Gingrich, Ortiz focused and directed JCN’s grassroots and business community to support Congressional leadership and include small business owners in the tax cut bill. JCN sent more than 550,000 emails to Congress and ran a multi-million dollar media campaign to support the bill."

(see their Job Creators Network site: https://www.jobcreatorsnetwork.com/about/)

I now know people across the political spectrum, and I'm one of them, who think the tax cut bill of 2017 was an outrageous trillion dollar plus giveaway to the richest of the rich that shafted ordinary Americans in the process in a big, big way.  So, IMO, that fact that this guy's non-New York, elite-favoring outfit had enough money to put up a cute sign in Times Square actually argues against the validity of whatever points he's trying to make.   

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