Three Ways to Play the President’s “Amazon Ire”

Keith Fitz-GeraldKeith Fitz-Gerald

No stranger to controversy, President Trump went after Amazon.com Inc. (Nasdaq: AMZN) with a vengeance – saying that the company pays no taxes, abuses the Postal Service, and puts retailers out of business. Amazon stock, of course, immediately got a 4.4% buzzcut that trimmed $31.77 billion off its market cap.

Unfortunately, the president is off base, and unless you take steps right now, your portfolio will get hammered as the battle escalates.

Don’t get me wrong – I get where Trump’s coming from, personally.

The notion that Amazon is somehow capitalizing on the system is a popular one. The war on success, begun decades ago and brought to the forefront for millions of hard-working people during the Global Financial Crisis, remains in full swing. The unfortunate byproduct, of course, is that huge swaths of society are not even remotely interested in fighting back to defend the founding principles of free enterprise, productivity, and personal initiative that define our national character.

What he’s saying is just not factually correct.

First, Amazon sheltered more than two-thirds of its profits for the five-year period that ended in 2017 while paying federal taxes at an effective rate of 11.4%… using various tax credits and tax breaks. At the same time, the president’s own tax cuts give Team Bezos a $789 million one-time tax shelter. What Amazon is doing is no different than what every other company is doing; the company is just an easy target.

If the president doesn’t like that, it’s Congress he should be pushing to change the system rather than punishing Amazon for being ultra-efficient at fully exploiting legal loopholes that otherwise should not exist in the first place.

Second, Amazon collects taxes in all states where sales taxes exist – plus D.C. – on 100% of its own sales, but not those of other sellers using Amazon’s platform. This, too, is a “fix the system” problem rather than a “target Amazon” issue. Incidentally, Amazon supports federal legislation requiring online retailers to pay state taxes on online sales.

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Adding fuel to the fire, Amazon is killing retailers the way big box stores like Walmart Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), and other players killed mom-and-pop stores. And, in the process, an entirely new class of local merchants is emerging with products and services that Amazon can’t replicate in local communities – like bakeries, small booksellers, local pubs and the like, where people matter more than products.

And, third, the U.S. Postal Service is so inefficient that it’s a running national joke. Package revenue actually grew by $2.1 billion last year (thanks in good measure to Amazon-related shipping) and tacked on 11.8%. The losses are from a decline in first-class mail revenue in an age of email. There’s also the billions in legacy pension costs and ultra-high labor costs that, again, are not an Amazon-related issue. That’s the real bleed to taxpayers and, I suspect, to the President.

How to Play the Situation for Maximum Profit Potential

So, now what?

I think there’s a great trade here… perhaps even two or three.

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Keith Fitz-GeraldKeith Fitz-Gerald

About the Author

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Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He’s a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don’t yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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