Amazon's Big Day, China's Charade & Other Must-Reads

Amazon turns 20 today. The company celebrates with a day of sales (and a free Macklemore concert for employees) that has pushed competitors like Walmart and Best Buy to counter with their own special offers. Is July 15 the new Black Friday? (Or Singles Day or Cyber Monday.)

It’s no hyperbole to say Amazon has revolutionized retail, but it’d be a gross understatement to call it a retailer. Amazon is increasingly like Google – a company that will get into anything as long as it’s done differently. That’s why at 20 Amazon isn’t yet showing a decent return: the few business lines that are wildly profitable feed the development of those that aren’t yet and may or may not ever be. The company’s promise is in its ubiquity – and that’s starting to worry a few people.

“Amazon is a global superstore, like Walmart. It’s also a hardware manufacturer, like Apple, and a utility, like Con Edison, and a video distributor, like Netflix, and a book publisher, like Random House, and a production studio, like Paramount, and a literary magazine, like The Paris Review, and a grocery deliverer, like FreshDirect, and someday it might be a package service, like U.P.S.”
- New Yorker writer George Packer

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China’s GDP is higher than expected and no one’s buying it. The government announced the economy grew 7% in the second quarter – convenient since that was the Party’s target. Expectations were 6.8% and that’s probably closer to the truth. Two things have traditionally made official Chinese GDP figures unreliable: 1) the government tacitly guarantees a number of unsavvy projects for political purposes, pushing investors to back buildings that won’t be occupied and factories that are left idle. That’s why Chinese debt has quadrupled since the financial crisis and why we just saw a lot of hot air come out of the stock market. 2) The government sets growth targets and if all else fails, cooks up the stats so they are met. But as Beijing has committed to getting rid of all that fakery and letting the economy slow naturally, one wonders why this quarterly charade persists.

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Greece may need a lot more help than it’s got. The Greek economy has deteriorated quickly under capital controls, and new austerity measures aren’t going to help. The IMF estimates the country’s debt will reach 200% of GDP in the next two years, according to a leaked memo, which risks bringing Athens right back to the edge. Though Athens has tried to push it out of negotiations, the IMF is actually the only institution that recommends “haircuts” – cutting the principal on Greece’s debt, the actual euro amount the country owes, and forgiving it. Germany continues to rule that out and the Financial Times reports (paywall) the IMF threatens to bail on the bailout if Angela Merkel doesn’t give a little.

“Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far.”
- IMF leaked memo

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Fed chair Janet Yellen will give her bi-annual testimony to the US Congress today and tomorrow. Fed watchers will look for hints (yet again) as to when rates will increase, so Yellen should remain her usual byzantine self before a Fed committee meeting in a couple weeks. Look for her thoughts too on the Chinese stock market meltdown, the Greek mess and the possible default of Puerto Rico. (What a week.)

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Pluto phoned home. The New Horizons flyby was a success and NASA has started receiving data, including new photos, from the probe. These will be revealed at a press conference at 3 p.m. ET. Humans and their technology have now reached every single planet in our solar system. (Let’s just call Pluto a planet, for today.)

“Just like we practiced,
just like we planned it. We did it.”
- Alice Bowman, New Horizons mission operations manager

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