From Smead Capital Management, April 11:
Dear fellow investors,
Having lived in Seattle for 40 years, I had a front-row seat as Microsoft, Amazon, Google and Facebook hired tens of thousands of young tech employees. In the period between 2010 and 2020, buildings were built, apartments were built and prosperity put the city on top of the world. From 2017-2020, more large building cranes were in operation in Seattle than in any other city in the U.S., even though Seattle only ranks 17th in population today. As those employees were being hired and those buildings were being built, here is what those four companies did in the stock market:
As you can see, the stock market celebrated hiring all of those folks with a vision of uninterrupted growth.
Now the hiring has become firing in the last six months and here is what those stocks did:
Can the biggest tech companies cut their way to prosperity?
In a prior era, the 1980s and 1990s, a huge amount of physical and financial assets had accumulated on the balance sheets of large American companies. Corporate raiders and leveraged buyout firms (private equity firms) stepped in and forced better usage of those assets. However, by the 1990s most of the low-hanging fruit had been taken. Late in the era, a sculldugger of a CEO, Al Dunlap, took Sunbeam and other companies over the edge. The media quickly turned on the methodology and they suddenly joked that “you can’t cut your way to prosperity.”
Now let’s throw the Silicon Valley Bank, Signature Bank and First Republic Bank difficulties into the mix....
....MUCH MORE
We considered Smead Capital's departure from Seattle to be a tell on the entire area and its socio-political-economic status.
June 23, 2020
Seattle Real Estate Not a Good Bet
Amazon and Microsoft have been the engine of growth, in a way similar to Silicon Valley where the whole world is funneling money into a small geographical area and in the case of Amazon with coronavirus we've just seen the high-water mark for this cycle.
Like so many societies throughout history getting wealthy means getting flabby, with politics and programs that a poorer, hungrier society can't afford.
Looking at a third metro area, Minneapolis' heyday was roughly 1880 - 1980 with the northern tier railroads, Great Northern and Northern Pacific and the heavyweight ag businesses, Pillsbury, General Mills etc. giving way to first round tech, Medtronic and St. Jude Medical, Control Data and Cray Research and then stagnation into a violent* little backwater, coasting on accumulated capital and slowly becoming irrelevant on the world stage except as a chokepoint for soybeans and corn being sent down the Mississippi or up to Duluth and eventually the Atlantic.
Seattle was touted as heaven-on-earth with the $15.00 minimum wage for restaurant workers but the touts never mentioned that it was only because of Amazon that it was possible.
And now those jobs are no more and 50% of them will not come back.
For a while Seattle had more construction cranes than New York and even London but those days are gone and here's the rest of the story from Phoenix's KTAR news:
Due to Seattle’s unrest, billion-dollar investment firm moving to Phoenix
PHOENIX — Coronavirus pandemic or not, an investment advisory company is leaving the cultural unrest in Seattle and moving its headquarters to Phoenix’s Camelback Corridor.....MORE
” … The unrest that has taken place in the city of Seattle … there is really is not a downtown business community today,” Smead Capital Management, President and CEO Cole Smead told KTAR News 92.3 FM.
Smead said that although taxes in Seattle are lower, candidate recruitment is harder and the cost of living within the city is more expensive than Phoenix.
“We’re hearing rumors of 40-story buildings that will be only 20-percent occupied by October,” Smead said....
*Another 11 people shot in three incidents yesterday on top of the 19 over the weekend and the ninety in the first 25 days after Mr. Floyd was murdered.
And the stabbings.
Minneapolis real estate probably not a good bet either, what with the City Council voting to disband, not defund but disband the police department.
