Sorry if this is a duplicate thread...I assumed this would already have its own thread, but I wasn't able to find it with the search function (and that's also the reason I included the symbol in the title). Anyway, I've been speculating about this particular move, and I have a very specific thought of where it ends up in finality, and I'll walk you through my reasoning--as usual, dissenting opinions welcome. Proximity doesn't matter The first thing I hear people say about the move is that time zone or proximity to customers is a driving concern. I do not believe they have given any consideration to this whatsoever (exception for Portland because it doesn't diverge significantly enough from Seattle culturally, environmentally, or economically--and thus will not draw employees that eschew Seattle). Time zone is irrelevant because the only value that gives is late-shift drones available during daylight hours. The high paying jobs they are looking for have no additional value based on the time zone they're in. Furthermore, the logistical question is irrelevant. Amazon is already approaching FedEx and UPS in terms of logistical capacity. And they're already located within a few hours of every home in the Continental US. So this question has been entirely discounted by them. The proximity that does matter to Amazon is proximity to employees. They need to be where their employees want to be (I'll keep coming back to this point). Public Transit and Green/Brownfield Development Sites Amazon was explicit that this was a consideration for them. Given their active targeting of millennials for future employees, and their growing preference for transit vs personal travel, this is a baseline requirement. The thing routinely overlooked here is the availability of access to many public transit options from a cohesive site. This second criteria is huge--it knocks out the legacy, transit-based cities (NYC, Boston, Washington, Chicago, SF); and a some of newer ones (Pittsburgh, LA, Atlanta). Furthermore, cities with limited transit options will be glossed over. For better or worse, even the most progressive urbanistas still carry a uniquely American preference for rail transit over bus. So too will Amazon carry this preference an eliminate all but those cities with well developed rail. So this narrows us down to the prime (get it?) candidates, Minneapolis, Denver, Dallas--available land and good transit. Notably, on this criteria we can toss Austin, Research Triangle, Nashville, Columbus, and Miami. Furthermore, the airport question comes into play--and this is more important than people give it credit for. Many connections and fast connections is the name of the game here. Dallas, Denver, and MSP all score very well in this respect, with Denver being slightly more central, with equal connections to the others, and a couple thousand feet nearer cruising altitude (this delivers slightly cheaper air fare). And they'll want to see an airport that delivers a lot of competition for their business. Dallas is a bastion of AAL with nearly 70% of market share, and MSP is a DAL hub (though less so than ATL) with 70% share, and Denver with 40% UAL, 30% SW, and 12% Frontier. The question of mass transit service to airport confirms those three finalists in much the same way. Denver and Dallas have airports in other states, but nevertheless reasonable connections, and Minneapolis has good connections and reasonable proximity to city proper. Weather This criteria punches way above its weight after eliminating those by the above criteria. Seattle has a nearly innate connection to the weather, and it's been linked to the city's Japan-esque suicide rate (but without the considerations of personal honor in Japan's rate). So those who live in Seattle will consider this regardless of it being explicitly disclosed as a criteria. Anyone who has been to Minn in winter, Dallas in summer, or Denver in either know exactly who wins this battle (and against every other city in the running except San Diego). It's the reason Denver is the Queen of the Plains and Cheyenne is not despite the massive advantage of Cheyenne being centrally located on the first transcontinental railroad link while Denver is blocked to the west. What "They" Say So, this has of course been the speculation of many a newspaper. I'll look at Washington Post's (owned by Bezos), NYT, and Forbes. Here's the articles: NYT: Dear Amazon, We Picked Your New Headquarters for You (Denver) WaPo: The Amazon finalists are already building tech economies. Which are the best? (Austin) Forbes: Amazon's HQ2 Is Destined For The Most Powerful City On Earth (Washington) If you haven't figured it out yet (and I'm probably bias for my hometown), but I believe Denver has the best prospects here. So, obviously I disagree with Washington Post. I agree more with Forbes, but reach a different conclusion, and I agree completely with NYT but for a different reason. Washington Post gets entirely too algorithmic about their selection, trying to weight criteria to "score" cities. I think they've gotten this wrong because I view this more as "threshold" criteria vs "sweetener" criteria vs "inferred criteria". WaPo fails in not trowing out certain cities that don't meet the baseline necessities that Amazon needs (notably Austin, Boston, and Research Triangle). Additionally they're overlooking the latent preconceptions that decision makers will bring to the table when they decide on their finalist. NYT gets it right, but for different reasons. Again, very algorithmic here, but a better weighting of criteria based on threshold vs other criteria when they throw cities out for failing to meet Amazon's needs. Not much more to say here because it would get semantic very quickly. Forbes has a very interesting take on it (that access to power is their goal); and it's actually a pretty compelling argument. The reach Washington for obvious reasons. But I think they're discounting the fear that locating ones self in Washington will make it a target for those targeting the Washington establishment politicians. Being able to target the WaPo, the world largest (and liberal leaning) company, and harm the District both symbolically and in fact is too great a risk for a company, that is doubtless to be the target of anti-trust scrutiny, to take on. Furthermore, Denver will still give low level Federal access (it's the number 2 metro in the nation for Federal jobs) without making it the target of this scrutiny. On top of that, a purple state is unlikely to be the target of a hard partisan push to punish liberal cities--plus our residents have a vote (Minneapolis scores well here too). Correlation not Causation The overarching consideration is where it's target employees want to live. This gives a somewhat perverse correlation where Amazon is most likely to give a boost to the city that least needs it. This means that they will gentrify the most gentrified location they can get close too. And so I'm inclined to reduce this to the question of, which city would continue its ridiculous real estate environment most with the benefit of Amazon's presence? Median home prices are: Denver ($400k), Minn ($245k), Dallas ($220k). And their appreciation since 2009, Denver-65%, Dallas-50%, Minn-35%. Without doubt Denver is the clear winner here. What I Say So, Denver, Dallas, or Minneapolis? The 8 million square feet things is about 4 downtown city blocks, give or take, of real estate for each of those cities. But 4 contiguous city blocks (or more outside downtown) is difficult to come by. Close to public transit, even harder. Close to multiple public transit lines, there's exactly 1 location. I firmly believe that the Barnum Yards in Denver will be the Amazon HQ2 based on everything I've outlined above. It's a 70 acre site of brownfield. Both Dallas and Minneapolis have very developed cores with limited brownfield development potential--excepting flood-prone areas. The Barnum Yards are just west of the 10th & Osage station in Denver. It's 5 mins from Downtown, 1 transfer and 50 mins from the airport by transit. It's 1/4 mile from I-25 or US-6 access, and about the same from each of major thoroughfares Colfax, Speer, and Santa Fe. 2 Stops outside of Downtown lightrail access, and with 5 lines going through it and single transfer access to every rail line in Denver and most bus lines (one of 3 stations that currently that have that in Denver). It's also close to small brownfield sites at the desireable Broadway and Alameda stations (the other two of those three station), plus more on the line to the airport at Stapleton Northfield. Obviously Minn and Dallas have nothing of the sort. Dallas has a few small areas near I-30 that could support something similar (with 1 or 2 transit lines access), but the weather and limited transit will limit their prospects. So there you have it. Amazon's HQ2: Denver's Barnum Yards. Also, it wouldn't surprise me to see the Pepsi Center parking lot being part of this, nor Northfield, nor I-25 and Broadway.
beerntrading, lots of stuff there. So what is your thinking on Amazon stock overall? Is it overprice at 256 or 265 times earnings? Or its just getting ramped up? I think if it can outgrow the market for years and years it almost doesn't have a peak price. But I welcome other thoughts.
A few years ago, I sold BABA to hold MO. Do you really want to know my thoughts on the 'zon? Lol. In all honesty, I really don't know. I run into problems with position sizing and liquidity (being an options trader) when stock prices get much above $180-350 depending on volatility, so I don't follow it much beyond figuring out divergence between XLT and the Nasdaq and using it as a bellwether. I know one thing. I would NOT short it....maybe a long-shot put when I thought we were going into full crash mode...but I doubt my ability to spot that coming before the volatility spike pushes me out of anything I could trade. Edit: also, if you learn anything from Amazon, learn to doubt PE-based valuations. Those are good for bottom fishing, but not top calling.
B&T....great post. One thing... you mentioned weather, but only in the context of quality of life. Not sure if HQ2 will also be a major logistical hub... but if so... weather applies to aviation in a big way. That could throw a cold blanket on MSP and to a lesser extent KDEN. Sunbelt's better.
The Brit bookmakers are usually pretty accurate. Denver is way down there. Atlanta is number one. https://www.paddypower.com/current-affairs They're dead wrong on Atlanta however imo. Georgia's move on DAL regarding the NRA and pending statewide legislation that critics claim will discriminate against same sex marriages is not gonna fly in Bezos' world. Northern VA is looking strong. https://www.arlnow.com/2018/02/20/a...sted-in-a-particular-article-about-arlington/
Not everything is honky dory when 5000 high paid employees are moving suddenly into town. Real estate prices go up so if you are looking to buy in the same area, try to beat them. Lots of other reasons I forgot about...
That's interesting. Look at the implicit geographic skew in the odds. Only Miami and LA are more disfavored than the middle of the country. And that's why I led off with "proximity doesn't matter".
Thanks for your analysis. What about that article that came out that reported a ton of hits to a Washington dc related article within an internal amazon IP. Is that just coincidence. I read the article on business Insider.
I think airport usability is an issue. DC and Atlanta are nightmares. Pittsburgh is a breeze not to mention CMU as one of the best university to produce future employees. I am not sure if they are going to build a new campus or not, but cheap land is also a factor. Try that around DC...