How Amazon Can Blow Up Asset Management
How Amazon Can Blow Up Asset Management
https://jirisancapital.com/amazon-can-b ... anagement/
According to the author, Amazon could be the next threat to all the active financial planners as well as robo advisers out there. It's a very dire concept for Wall Street and high paying bankers.
According to the author, Amazon could be the next threat to all the active financial planners as well as robo advisers out there. It's a very dire concept for Wall Street and high paying bankers.
Re: How Amazon Can Blow Up Asset Management
If they could reduce the expense ratio from a vanguard admiral fund, I'd be there.
Fascinating that Alibaba amassed 92b in it's money market fund so quickly
Fascinating that Alibaba amassed 92b in it's money market fund so quickly
Never look back unless you are planning to go that way
Re: How Amazon Can Blow Up Asset Management
Amazon is trying to get into too many areas. I buy as little as possible from them. Amazon as a fund provider? Not for me.
Re: How Amazon Can Blow Up Asset Management
Before you know it GE will get into financial services.
Re: How Amazon Can Blow Up Asset Management
All the author actually does is say:htdrag11 wrote: ↑Tue Mar 06, 2018 9:58 pm https://jirisancapital.com/amazon-can-b ... anagement/
According to the author, Amazon could be the next threat to all the active financial planners as well as robo advisers out there. It's a very dire concept for Wall Street and high paying bankers.
"Hey, Amazon is a pretty great company! If they went into this other business they would totally dominate!"
Just like how the Fire Phone blew up the smartphone industry and destroyed Apple and Samsung.
...and Amazon Destinations blew up the travel industry
...and Amazon Local blew up Groupon and the coupon industry
...and Amazon Register blew up Square, Stripe, PayPal, Visa, and Mastercard
...and Amazon Webstore was going to blow up Shopify
...and Amazon WebPay was going to blow up Zelle
...and Amazon AskVille was going to blow up StackOverflow
...and Amazon Auction was going to blow up eBay
I mean, Amazon is a great company but there's nothing remotely guaranteed about their success in a new industry.
And looking at the success of Alibaba is completely misleading. People in developing countries don't trust banks. They don't trust government guarantees about deposits. They don't even trust that the bank manager won't forge your signature and transfer all of your money away.[1][2]
Americans may not like their banks (c.f. WellsFargo) but it is nowhere remotely close to the level of paranoia that people in China feel towards banks. Using made up number to try to make the point: in the US people might trust Amazon 30% more than they trust their bank. But in China they trust Alibaba 1,000% more than they trust their bank. That makes it a lot easier for Alibaba to attract funds than it would be for Amazon.
The whole thing seems to be a flight of fantasy by the author. No evidence that Amazon is interested in the market and even if they are, it would take months or years to have an effect. (Have you seen any impact from their grocery domination yet? From their health care domination with Berkshire Hathaway yet?)
[1]: Examples: last week China fined 19 banks for fraud; 2 weeks before that they fined 12 different banks for a different kind of fraud; the week before that...
[2]: I can't find a recent English language version immediately but here's an example of the kind of story that pops up at least every three or four months: http://www.scmp.com/article/1005044/ban ... ove-assets
Re: How Amazon Can Blow Up Asset Management
Re: How Amazon Can Blow Up Asset Management
Can’t blow up whats already blown up.
Vanguard got there first.
Vanguard got there first.
-
- Posts: 1079
- Joined: Tue Jun 21, 2011 10:35 am
- Location: Deep in the Balkans
Re: How Amazon Can Blow Up Asset Management
I believe you mistake lack of trust for rampant greed. Chinese know you don't get rich by putting money in a bank. ...and as for citing the SCMP, Jack Ma owns that newspaper now.
Re: How Amazon Can Blow Up Asset Management
Americans are also greedy; Chinese don't have some monopoly on that. The difference is trust in financial institutions.HongKonger wrote: ↑Wed Mar 07, 2018 1:36 amI believe you mistake lack of trust for rampant greed. Chinese know you don't get rich by putting money in a bank. ...and as for citing the SCMP, Jack Ma owns that newspaper now.
Re: How Amazon Can Blow Up Asset Management
Kindle books are lower cost than hardcovers. (I get my Kindle books from the public library for free - but that's a different question...)
And you aren't actually trying to indicate that Kindle books are anything other than a raging success are you?
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: How Amazon Can Blow Up Asset Management
JoeRetire wrote: ↑Wed Mar 07, 2018 7:50 amKindle books are lower cost than hardcovers. (I get my Kindle books from the public library for free - but that's a different question...)
And you aren't actually trying to indicate that Kindle books are anything other than a raging success are you?
Members of this forum have stated that in some nstances kindle books have become as/more expensive than their paper equivalents. I just bought a Kindle for convenience and space saving. I am saying that Amazon is not guaranteed to be the lowest cost.
Re: How Amazon Can Blow Up Asset Management
Sure.
In some cases, it's possible to find less expensive books than the Kindle versions.
And you buy as little as possible from Amazon. Because they get into too many areas.
This isn't just my wallet. It's an organizer, a memory and an old friend.
Re: How Amazon Can Blow Up Asset Management
Amazons goal is to basically skim all economic activity. Whether they can do it or not is an answer no one knows.
But they are increasing competition and innovation and that is good for the long term.
Re: How Amazon Can Blow Up Asset Management
Amazon would be no different in their unethical treatment of their clients. What incentives does Amazon have to act in the best interests of their clients? None.
Re: How Amazon Can Blow Up Asset Management
One piece of advice from David Swensen that always resonated with me was "that there's an irreconcilable conflict in the mutual fund industry between the profit motive and fiduciary responsibility. There are two major organizations, Vanguard and TIAA-CREF, which operate on a not-for-profit basis. That conflict between profit and fiduciary duty disappears. Vanguard and TIAA-CREF are dedicated to serving their investors. They are shining beacons in this otherwise ugly morass."
I don't get that vibe from Amazon.
Re: How Amazon Can Blow Up Asset Management
As someone who has been a vendor to Amazon since it began I'll just say that Amazon's pattern is to start out by offering you all kinds of too good to resist benefits, all possible because they can sell at a loss and just keep making more money selling shares. But once they get that 80% market share, they will turn around and hose you. They are the most unethical company I have ever dealt with. They get away with not paying vendors (not rumor, it happened to me and there was no way I could recover the funds, which were just low enough to make it not economically worthwhile to sue.) They get away with changing contract terms on the fly, with getting major vendors to sign contracts where they are not told what they will be paid for what they are selling, and their treatment of employees is notorious. Their vendor support is a combo of robo-email readers and people who barely speak English operating out of foreign locations. They will shut down accounts for no reason. They will strip rankings from products for erroneous reasons and refuse to review data that contradicts their claims. It goes on and on.
You really don't want them to be anywhere near your retirement funds. If they went into that business, they would offer you irresistibly good terms to start out with, but once they'd driven their competition out of business, watch out.
You really don't want them to be anywhere near your retirement funds. If they went into that business, they would offer you irresistibly good terms to start out with, but once they'd driven their competition out of business, watch out.
Re: How Amazon Can Blow Up Asset Management
Things have changed at Tiaa-CREF, including the name.Fclevz wrote: ↑Wed Mar 07, 2018 9:29 amOne piece of advice from David Swensen that always resonated with me was "that there's an irreconcilable conflict in the mutual fund industry between the profit motive and fiduciary responsibility. There are two major organizations, Vanguard and TIAA-CREF, which operate on a not-for-profit basis. That conflict between profit and fiduciary duty disappears. Vanguard and TIAA-CREF are dedicated to serving their investors. They are shining beacons in this otherwise ugly morass."
I don't get that vibe from Amazon.
https://www.nytimes.com/2017/10/21/busi ... -tiaa.html
Re: How Amazon Can Blow Up Asset Management
yep.KSActuary wrote: ↑Wed Mar 07, 2018 3:45 pmThings have changed at Tiaa-CREF, including the name.Fclevz wrote: ↑Wed Mar 07, 2018 9:29 amOne piece of advice from David Swensen that always resonated with me was "that there's an irreconcilable conflict in the mutual fund industry between the profit motive and fiduciary responsibility. There are two major organizations, Vanguard and TIAA-CREF, which operate on a not-for-profit basis. That conflict between profit and fiduciary duty disappears. Vanguard and TIAA-CREF are dedicated to serving their investors. They are shining beacons in this otherwise ugly morass."
I don't get that vibe from Amazon.
https://www.nytimes.com/2017/10/21/busi ... -tiaa.html
RIP Mr. Bogle.
-
- Posts: 48947
- Joined: Fri May 11, 2007 11:07 am
Re: How Amazon Can Blow Up Asset Management
Bezos is on record as saying that he intends for Amazon to have bigger disasters than the Kindle Fire phone.AlohaJoe wrote: ↑Tue Mar 06, 2018 11:53 pmAll the author actually does is say:htdrag11 wrote: ↑Tue Mar 06, 2018 9:58 pm https://jirisancapital.com/amazon-can-b ... anagement/
According to the author, Amazon could be the next threat to all the active financial planners as well as robo advisers out there. It's a very dire concept for Wall Street and high paying bankers.
"Hey, Amazon is a pretty great company! If they went into this other business they would totally dominate!"
Just like how the Fire Phone blew up the smartphone industry and destroyed Apple and Samsung.
...and Amazon Destinations blew up the travel industry
...and Amazon Local blew up Groupon and the coupon industry
...and Amazon Register blew up Square, Stripe, PayPal, Visa, and Mastercard
...and Amazon Webstore was going to blow up Shopify
...and Amazon WebPay was going to blow up Zelle
...and Amazon AskVille was going to blow up StackOverflow
...and Amazon Auction was going to blow up eBay
I mean, Amazon is a great company but there's nothing remotely guaranteed about their success in a new industry.
And looking at the success of Alibaba is completely misleading. People in developing countries don't trust banks. They don't trust government guarantees about deposits. They don't even trust that the bank manager won't forge your signature and transfer all of your money away.[1][2]
Americans may not like their banks (c.f. WellsFargo) but it is nowhere remotely close to the level of paranoia that people in China feel towards banks. Using made up number to try to make the point: in the US people might trust Amazon 30% more than they trust their bank. But in China they trust Alibaba 1,000% more than they trust their bank. That makes it a lot easier for Alibaba to attract funds than it would be for Amazon.
The whole thing seems to be a flight of fantasy by the author. No evidence that Amazon is interested in the market and even if they are, it would take months or years to have an effect. (Have you seen any impact from their grocery domination yet? From their health care domination with Berkshire Hathaway yet?)
[1]: Examples: last week China fined 19 banks for fraud; 2 weeks before that they fined 12 different banks for a different kind of fraud; the week before that...
[2]: I can't find a recent English language version immediately but here's an example of the kind of story that pops up at least every three or four months: http://www.scmp.com/article/1005044/ban ... ove-assets
The business model is to keep inventing things. Most will fail, but Amazon Web Services is now a huge part of their profits.
If anyone could disrupt American banking, it would be WalMart. Put all those cheque cashing places out of business . However the banking industry has comprehensively lobbied to prevent WMT from entering. But WMT has the physical presence and the warm customer base that needs better banking services.
The sort of people who are heavy users of Amazon already have bank accounts, investment accounts etc, I suspect.
The regulations about Systemically Important Financial Institutions have driven the likes of GE out of the consumer finance industry. I think if I was Amazon I'd have to think very carefully about that.
The supermarkets here (UK) all offer banking services, but i don't think it's been a huge moneyspinner. 90% of people still bank primarily with one of the big 4 (RBS/ Natwest, Lloyds (Halifax), HSBC, Barclays). Similarly in Canada with their big 5. Australia & NZ I think with the big 3?
Re: How Amazon Can Blow Up Asset Management
At the time, I didn't think Amazon won their war against the major publishers. A year or two after the settlement a large percentage of bestsellers were priced as "set by publisher". Cheap Kindle books disappeared because of publishers, not Amazon, imho.
My biggest problem with Kindle books however is that when a novel goes to paperback the Kindle price doesn't move down accordingly. Thus the paperback can be bought more cheaply than the Kindle version. Which doesn't seem logical to me. I think at the least the Kindle price should match the paperback price at that point.
My biggest problem with Kindle books however is that when a novel goes to paperback the Kindle price doesn't move down accordingly. Thus the paperback can be bought more cheaply than the Kindle version. Which doesn't seem logical to me. I think at the least the Kindle price should match the paperback price at that point.
Re: How Amazon Can Blow Up Asset Management
You would think that. But the difference is that Amazon is allowed to set the sale price for the paperback at whatever level they want, and take whatever profit margin that price generates. However, the 6 major publishers formed a cartel and refused to sell e-Books through any retailer that would not allow the publisher to set the final price paid by the customer. Amazon de-listed every book from those publishers for several months, but eventually the drain of having ~70% of the published titles unavailable would have killed the Kindle, so they gave in. The courts fined the publishers (and Apple) for this nonsense, but didn't make them stop doing it.Milo wrote: ↑Thu Mar 08, 2018 6:44 am My biggest problem with Kindle books however is that when a novel goes to paperback the Kindle price doesn't move down accordingly. Thus the paperback can be bought more cheaply than the Kindle version. Which doesn't seem logical to me. I think at the least the Kindle price should match the paperback price at that point.
-
- Posts: 93
- Joined: Wed May 23, 2012 9:57 am
Re: How Amazon Can Blow Up Asset Management
The idea that the publishers formed a cartel missed hugely important points. Amazon was selling books at a huge loss for years, in order to destroy all their competitors who couldn't just keep issuing stock to pay their bills. They were losing $2 on every copy my publishing company sold through them because they priced those books below the wholesaler discount. But doing that stopped people from buying our books at Borders and other chains that closed. Once the chains were dead, Amazon stopped the deep discounts on print. They started then working on destroying other online bookstores by selling ebooks at obscene discounts while paying publishers full price. Again, they could do this because investors just kept buying their stock so they could lose money all they wanted and stay in business--and pay the top guys bi!lions.
The publishers tried to set prices to keep Amazon from using selling below cost throughout the site as a way to kill the only competitors left in the eBook business. It is a huge irony that the courts ruled it was unfair antitrust on the publisher's part in a way that allowed Amazon to get much closer to becoming the greatest monopoly ever created.
Now Amazon is pushing a combination of loading all its topic bestseller lists with books from their wholly owned publishing imprints and filling the rest with books sold in a subscription model that forces publishers to only sell on Amazon and pays less per copy, but boosts titles high on the searches. So now publishers and authors that don't give Amazon exclusivity and accept lower royalties can no longer have any visibility on the site.
This hurts even those readers who don't buy from Amazon. They have such market share that whole subgenres have become so hard to sell after having been pushed way down on Amazon searches and replaced by Amazon-only books on those searches, that publishers no longer publish them. Intelligent nonfiction is hardest hit.
We tried their subscription model for a well-reviewed nonfiction title that had sunk to page 10 on its topic search. The book shot up to the second page of the search for the whole 3 months of our experiment. The problem is it only earned $23 per month. This is a niche specialty book of a type that until Amazon defeated the publishers would have sold at least 5,000 copies at a premium price that would have made it worth publishing. With how Amazon is working now, it just isn't worth publishing the kinds of books that take a year to research anymore. Mass market books still do okay, but most of the not-for-beginners books you read probably never sold more than 10-15,000 copies a year. When I started out in specialty publishing in the 1980s, a successful book was priced at $17.95 and sold 5-10,000 copies total. Amazon has taught readers they are being ripped off paying over $9.99 thanks to their selling below cost.
It is a huge, little understood tragedy for those of us who learn from reading books.
The publishers tried to set prices to keep Amazon from using selling below cost throughout the site as a way to kill the only competitors left in the eBook business. It is a huge irony that the courts ruled it was unfair antitrust on the publisher's part in a way that allowed Amazon to get much closer to becoming the greatest monopoly ever created.
Now Amazon is pushing a combination of loading all its topic bestseller lists with books from their wholly owned publishing imprints and filling the rest with books sold in a subscription model that forces publishers to only sell on Amazon and pays less per copy, but boosts titles high on the searches. So now publishers and authors that don't give Amazon exclusivity and accept lower royalties can no longer have any visibility on the site.
This hurts even those readers who don't buy from Amazon. They have such market share that whole subgenres have become so hard to sell after having been pushed way down on Amazon searches and replaced by Amazon-only books on those searches, that publishers no longer publish them. Intelligent nonfiction is hardest hit.
We tried their subscription model for a well-reviewed nonfiction title that had sunk to page 10 on its topic search. The book shot up to the second page of the search for the whole 3 months of our experiment. The problem is it only earned $23 per month. This is a niche specialty book of a type that until Amazon defeated the publishers would have sold at least 5,000 copies at a premium price that would have made it worth publishing. With how Amazon is working now, it just isn't worth publishing the kinds of books that take a year to research anymore. Mass market books still do okay, but most of the not-for-beginners books you read probably never sold more than 10-15,000 copies a year. When I started out in specialty publishing in the 1980s, a successful book was priced at $17.95 and sold 5-10,000 copies total. Amazon has taught readers they are being ripped off paying over $9.99 thanks to their selling below cost.
It is a huge, little understood tragedy for those of us who learn from reading books.
-
- Posts: 1860
- Joined: Sat Apr 10, 2010 6:05 pm
- Location: Valley of the Sun, AZ
Re: How Amazon Can Blow Up Asset Management
Best sellers on Kindle were about the same price as hard-cover when Kindle first appeared, and they still are close, maybe a little lower than before. Low price/free genre & self-published books were available then and still are. As an aside, I've been reading Kindle books for years and have never paid a dime yet.
Re: How Amazon Can Blow Up Asset Management
destinationnc wrote: ↑Thu Mar 08, 2018 8:32 amSo where do you shop instead, and do you pay the same, less, or more for those items? Sales tax?
I buy used books and a few products not found in local stores from Amazon. I only buy what I need for the most part. I choose to buy local if I can even if somewhst more expensive.
Re: How Amazon Can Blow Up Asset Management
+1 Loss of titles is a huge problem.Scooter57 wrote: ↑Thu Mar 08, 2018 9:53 am The idea that the publishers formed a cartel missed hugely important points. Amazon was selling books at a huge loss for years, in order to destroy all their competitors who couldn't just keep issuing stock to pay their bills. They were losing $2 on every copy my publishing company sold through them because they priced those books below the wholesaler discount. But doing that stopped people from buying our books at Borders and other chains that closed. Once the chains were dead, Amazon stopped the deep discounts on print. They started then working on destroying other online bookstores by selling ebooks at obscene discounts while paying publishers full price. Again, they could do this because investors just kept buying their stock so they could lose money all they wanted and stay in business--and pay the top guys bi!lions.
The publishers tried to set prices to keep Amazon from using selling below cost throughout the site as a way to kill the only competitors left in the eBook business. It is a huge irony that the courts ruled it was unfair antitrust on the publisher's part in a way that allowed Amazon to get much closer to becoming the greatest monopoly ever created.
Now Amazon is pushing a combination of loading all its topic bestseller lists with books from their wholly owned publishing imprints and filling the rest with books sold in a subscription model that forces publishers to only sell on Amazon and pays less per copy, but boosts titles high on the searches. So now publishers and authors that don't give Amazon exclusivity and accept lower royalties can no longer have any visibility on the site.
This hurts even those readers who don't buy from Amazon. They have such market share that whole subgenres have become so hard to sell after having been pushed way down on Amazon searches and replaced by Amazon-only books on those searches, that publishers no longer publish them. Intelligent nonfiction is hardest hit.
We tried their subscription model for a well-reviewed nonfiction title that had sunk to page 10 on its topic search. The book shot up to the second page of the search for the whole 3 months of our experiment. The problem is it only earned $23 per month. This is a niche specialty book of a type that until Amazon defeated the publishers would have sold at least 5,000 copies at a premium price that would have made it worth publishing. With how Amazon is working now, it just isn't worth publishing the kinds of books that take a year to research anymore. Mass market books still do okay, but most of the not-for-beginners books you read probably never sold more than 10-15,000 copies a year. When I started out in specialty publishing in the 1980s, a successful book was priced at $17.95 and sold 5-10,000 copies total. Amazon has taught readers they are being ripped off paying over $9.99 thanks to their selling below cost.
It is a huge, little understood tragedy for those of us who learn from reading books.
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: How Amazon Can Blow Up Asset Management
The issue now is that differentiation through lower expense ratios is over. Lowering an ER from .75% to .03% was/is big. Lowering an ER from .03% to .01% would be nothing ($20 annual savings on a $100k balance); one of the funds in my 457 has an ER of 0%. Any new player in this arena would have to be able to provide value beyond what the existing providers already do. Active stock picking is a fool's errand, and costs can't be substantially lowered with index funds, so what is Amazon or anyone else to do to meaningfully differentiate themselves from the established competitors?
The Sensible Steward
Re: How Amazon Can Blow Up Asset Management
Our average expense ratio is .08 accross the funds, which ends up being $650. I wouldn't move for .02 expense ratio, but I would consider it for a .03 or more. Even then... I might just stick with vangaurd as I like the way the company is structured... being owned by the shares and all.willthrill81 wrote: ↑Fri Mar 09, 2018 12:45 amThe issue now is that differentiation through lower expense ratios is over. Lowering an ER from .75% to .03% was/is big. Lowering an ER from .03% to .01% would be nothing ($20 annual savings on a $100k balance); one of the funds in my 457 has an ER of 0%. Any new player in this arena would have to be able to provide value beyond what the existing providers already do. Active stock picking is a fool's errand, and costs can't be substantially lowered with index funds, so what is Amazon or anyone else to do to meaningfully differentiate themselves from the established competitors?
You're right, they won't be dropping expense ratios significantly, it will be some value add, like targeted at ETF buyers or a really simple rebalancing method.
Never look back unless you are planning to go that way
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: How Amazon Can Blow Up Asset Management
Yes, something like that would make sense, but they aren't going to dominate the industry with such a niche strategy. I doubt that Amazon will ever go for this anyway.Cycle wrote: ↑Fri Mar 09, 2018 7:35 amOur average expense ratio is .08 accross the funds, which ends up being $650. I wouldn't move for .02 expense ratio, but I would consider it for a .03 or more. Even then... I might just stick with vangaurd as I like the way the company is structured... being owned by the shares and all.willthrill81 wrote: ↑Fri Mar 09, 2018 12:45 amThe issue now is that differentiation through lower expense ratios is over. Lowering an ER from .75% to .03% was/is big. Lowering an ER from .03% to .01% would be nothing ($20 annual savings on a $100k balance); one of the funds in my 457 has an ER of 0%. Any new player in this arena would have to be able to provide value beyond what the existing providers already do. Active stock picking is a fool's errand, and costs can't be substantially lowered with index funds, so what is Amazon or anyone else to do to meaningfully differentiate themselves from the established competitors?
You're right, they won't be dropping expense ratios significantly, it will be some value add, like targeted at ETF buyers or a really simple rebalancing method.
The Sensible Steward
Re: How Amazon Can Blow Up Asset Management
"Alexa, what stock should I buy today?"
Just think of all the data mining that Alexa can do - listening in to household's conversations times tens of thousands. It will know what people are talking about and what people will want/need/buy - then it can tell you what stock to buy
What could go wrong?
Just think of all the data mining that Alexa can do - listening in to household's conversations times tens of thousands. It will know what people are talking about and what people will want/need/buy - then it can tell you what stock to buy
What could go wrong?
-
- Posts: 3512
- Joined: Sat Mar 04, 2017 4:28 pm
- Location: Western Washington
Re: How Amazon Can Blow Up Asset Management
Interesting argument to raise, since as far as I can tell, Amazon seems to be evolving their online sales business to be more and more like Ali Express, which I don't think will be a good thing in the long run.
I'm not the poster you're responding to, but I don't know. I haven't looked into the finances of Amazon's ebooks. I know they're popular, and I think generally successful, but I don't know if driving competitors out of business is more of a measure of raging success than actually making money on a venture.
Regardless, I think it's the wrong question for this discussion.
The better question is what made ebooks a success for Amazon, and how does that experience help them if they get involved in asset management?
The paper to electronic ship has already sailed, and there's not much room to cut costs compared to Vanguard and still make a profit. There's a couple other options like robo-advising and using low cost funds and services as loss leaders to draw customers towards higher cost offerings. Both already have established competitors, all of which already appear to me to be fairly competent at what they do.
I don't see much for the author of this article to base his speculation on: no news from Amazon, and no clear way for them to bring something radically new to asset management.
I'm more curious what Amazon's plans for health care are. That industry absorbs an incredibly huge amount of money above and beyond what the actual care providers are paid. There should more room to innovate there.