3 Sunday Morning Thoughts – November 2 Edition

Written by Bryan Lutz, Editor at Dollarcollapse.com:

This edition was written early Friday morning.

That’s because as you read this I’ll probably be running. I’m running my first half-marathon this weekend along the shore of Boundary Bay, in a municipal suburb of Vancouver, British Columbia.

It’s one of our family’s favorite spots to relax in the Summer and lat Spring. If you look directly across the bay you can see the Peach Arch marking the border crossing to the State of Washington.

Usually what happens is… Every Sunday morning I sit down to write a few thoughts.

Sometimes these thoughts end up being about life, other times they are on gold, geopolitical issues affecting the markets, or the economy.

Here are three thoughts for this morning:

1. Is Amazon maximizing shareholder value with robots and AI? Or what’s AI really doing for shareholder value?

This week, the company announced they were going to layoff 14,000 corporate workers, citing AI.

Then their stock price jumped.

However, according to Peter St. Onge, “someone got a hold of Amazon’s internal documents,” which shows Amazon’s plans to layoff up to 600,000 workers and replace them with robots and AI by 2033.

For the past several years, Amazon has quietly been increasing revenue, while reducing employees.

According to Wolf Richter from Wolf Street dot com…

“At the headcount peak in 2021, Amazon booked $470 billion in revenues. By 2024, with 52,000 fewer employees, revenues had soared by 36% to $638 billion. That is the result of the corporate drive for efficiency – including automation and AI.

Amazon, after the over-hiring binge, is doing more with fewer employees through process improvements, automation, and AI. It could continue the net headcount reduction even as revenues increase at a substantial clip.”

While efficiency has been increasing at Amazon, the company has been investing in digital infrastructure to support their AI and army of robot workers.

Richter writes…

“Amazon has been throwing tens of billions of dollars at capital expenditures every year: 

In 2023, $48 billion; and in 2024, $78 billion. 

It expects capex in 2025 to be higher still. 

These investments went “primarily” into technology infrastructure (AWS data centers and the like) and “additional capacity to support our fulfillment network,” according to its 10-K filing.

These billions of dollars of capex are revenues for other companies, such as construction companies that build AI data centers, companies selling data center equipment, server makers, chipmakers, companies manufacturing the robotic equipment at Amazon’s fulfillment centers, software providers, etc. etc.”

Now, if you were the CEO of a large tech company like Amazon, you’d have all your numbers coming to you. That way you can navigate and lead the company despite the stock market prices.

Bezos already knows this, he lived through it all during the “dot com” bubble.

That’s when Amazon shares went from $113 to $6 per share even though all of Amazon’s metrics were healthy and going up. There was a clear misalignment between price and share value.

The introduction of robotics and AI at such a massive scale seems to head in the other direction. It’s reckless and a delusional assumption to think that robots and AI can replace the resilience, rapid response, and flexibility of human teams.

Especially when it comes to problem solving.

If anything, the recent AWS “blip” that knocked out a huge portion of the web from banks to smart beds for almost a day should proves there’s uncertainty and volatility coming when you plan to replace 600,000 employees with robots, automation, and AI.

2. Trump’s energy at 79 is astounding. Also, glad to see western culture drawing the line this Halloween (you’ll see).

It seems like yesterday when we were seeing videos of Trump staring down China’s President Xi across the negotiation table.

Now he’s already back at the White House?

Gee Whiz, sir.

Gee Whiz.

Lo and behold, he has enough energy to fly twenty-one hours back to the White House to hand out candy to kids for Halloween.

Ain’t that some wholesome fear-based fun.

Also, pulled this screenshot straight from the etsy website.

For the time being, looks like Etsy shut the store down.

Someone at Etsy has a moral compass.

Maybe the store will get shut down for good.

3. This one may be controversial, but gold is starting to do what Bitcoin started ten years ago.

This week I published a piece entitled, ‘And So It Begins: Gold Is No Longer Cyclical. It’s Existential.’

In the blog post, I show how investment cycles broke after 1971, when Nixon decoupled the USD from gold. Investment cycles in industry, commodities, and financial markets were replaced with a credit-driven cycles, and vandalized by regulators.

Now that credit is breaking down, the paper gold price isn’t moving with credit cycles. It is now existential.

In other words, the paper gold market is driven by survival instinct coupled with the old fear and greed index.

That is why we can see gold move up $1000 in a quarter and then drop almost $500 with a few days.

As the gold price increases, the existential booms and busts will only get bigger.

So, about Bitcoin…

Bitcoin’s math was invented in reaction to the 2008 financial crisis. It was invented to contrast the ever-inflating fiat currency. The inventor, Satoshi Nakamoto took much of gold’s qualities and crammed them into an blockchain algorithm that could be used for trade.

Before a currency becomes a unit of account, it is generally volatile. It’s taken years before Bitcoin could even be considered a medium of exchange. And its quality as a store of value is still debated.

You can see how Bitcoin’s price has been volatile, and then it really took off from 2020-2021.

That wasn’t part of the credit cycle. It was mostly an escape route for people wanting out of the fiat system.

Now gold is on its way too.

First, gradually with the central banks.

Then suddenly when the masses scramble for physical gold.

Gold and Bitcoin. They’re both escape routes…

Both charts are starting to show it.