Mike’s Financial Pocket – Will Jeff Bezos Re-Kindle Print Media?

One of the more interesting stories from the last week was the purchase of the Washington Post by Amazon.com founder Jeff Bezos. Bezos ponied up $250 million of his own personal fortune–so this was not a purchase by Amazon. As we discussed on the Pocket Cast of Liberty, the Washington Post was worth a lot more ten years ago than it is today, due to the so-called “death of print media” and the rise of smartphones, tablets, and web-based reporting.

Immediately, pundits of all stripes began to paint Bezos as either a libertarian, or a liberal, and the implications for the editorial board or positions taken by journalists at the Washington Post. Pretty speculative stuff, if you ask me. But since it has been brought up, Dave Weigel at Slate brought up an interesting point about Bezos versus labor unions. We really don’t know what Bezos would do if there is a labor disagreement over at the Washington Post in the future. This could certainly happen in the near future, because one of the issues regarding the purchase of the Washington Post by Bezos is their pension fund. Currently (and this was very surprising to me), it is over-funded by $600 million. That is pretty remarkable, though it should be noted that the recent market run-up could be responsible for that.

What’s even more interesting is the fact that the Washington Post has agreed to oversee and manage the pensions for current retirees, and Bezos will take on the responsibility for the pensions of current employees–but WaPo gave Bezos $50 million in addition to the projected cost of the pension benefits for current employees.


This WaPo deal was, in my mind, similar to the deal that Warren Buffett struck with Goldman Sachs in 2008. As you may recall, during the financial crisis many of the investment banks were teetering on the edge of collapse due to leveraged bets. Buffett invested in Goldman Sachs by buying preferred stock (which paid a large dividend) and receiving “warrants” which permitted Buffett to buy Goldman stock at a certain price (referred to as a “strike”). Buffett cleaned up, earning $3.2 billion in less than five years for Berkshire Hathaway.

Now, I’m not suggesting that Bezos will flip WaPo and make a cool billion. What I am suggesting is that investors with deep pockets can buy stock or assets of companies desperate for cash and get amazing prices for being “liquid” (i.e., having a lot of cash) when the time is right.

Here are my thoughts and predictions regarding the WaPo purchase by Bezos, in no particular order of importance.

First, I do not think that Bezos being a “libertarian,” a “liberalitarian,” or any other political label which you can dream up, will be of any import. The Washington Post is in the business of selling news. If it merely sells commentary on the news, it will appeal to a much more limited group of people. Do you really think becoming the MSNBC of print media will sell a bunch of papers? Doubtful. I think Bezos is a smart guy and my prediction is that he will encourage editorial freedom. The WaPo is not going to become the “Bezos Print Media News Network.”

Corollary: To all the folks who got vapors over Bezos buying the WaPo, or who fear/can’t wait for the takeover of a newspaper by the Koch Brothers: you are wasting your breath, in my opinion. The marketplace of ideas is what will determine the success or failure of a periodical. If there aren’t enough consumers interested in your product, whether it’s coffee, media, or an automobile, you will fail. If there are, you will survive. If there are more consumers clamoring for your amazing product, you will thrive. That’s the beauty of capitalism!

Second, a thought that I discussed on last week’s Pocket Cast of Liberty: In response to Jay Caruso’s question of why Bezos bought the WaPo, I think that one of the reasons that he may have done it is to re-kindle the e-newspaper business. Although the purchase of WaPo was buy Bezos–and not Amazon– it would be hard for me to believe that Bezos doesn’t want to take a stab at creating a successful version of “The Daily,” or transition the WaPo to an e-newspaper that people who own Kindles can get exclusively, or for a discounted rate.

Whether Bezos will be successful in this regard, it remains to be seen. However, I am pleased to see private entrepreneurs investing in newspapers, as opposed to the proposed government bailout of newspapers which was suggested by Nancy Pelosi and others just a few short years ago.

As if we need another reason for the newspapers to be playing favorites with the Democrats, right?

As always, free markets are better markets.

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Look for lots of retail stock earnings reports this week, including Wal-Mart, Macy’s, and Nordstrom. Cisco and Deere will also be reporting, giving us some insight on the tech and agricultural industries as well.

Initial jobless claims data will be released on Thursday, August 15. Look at this chart. What a slow grinding “recovery” we are having…

We’ll also have some reports on industrial production and loan charge-offs later in the week, which will also give us a glimpse at how the broader sectors of the economy are preforming.

Enjoy your week!