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Bed Bath & Beyond Warns It May Go Out of Business

CategoriesIssue Jan'23, Site Updates & News., World Finance News_
with some additional commentary by me

This is sad for us, retailers. We dont want Amazon devouring the entire physical (and digital) economy. We don’t want Wall St devouring Main St.

What happens is that operating normally is just not profitable. Amazon took all the brick and mortar shops out of business – but Amazon’s physical store itself is not profitable, either. Only their AWS branch (digital services) has been profitable lately. So in this “everything squeeze,” it appears more and more that normal operations are not profitable, for anybody.

And if a business entity finds a way to be profitable, the market adjusts quickly (weeks? months? years?) to reduce margins to near-zero, and profit disappears again. Of course, the question is: what do we do now? And how to operate in such conditions? And that, my friends, will be a topic for a future lengthy article (or several).

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Turns out (1) University of California gets to gamble with – presumably students’? – money, and (2) Blackstone casually “guarantees” an 11.25% annualized return on investment for 6 years

CategoriesIssue Jan'23, Site Updates & News., World Finance News_

The value of the deal is $4B with a B, US dollars. And it has been publicized today, Jan 3rd 2023.

A few questions arise. Firstly, where did the $4B come from? ucod.edu says:

Each of the ten UC campuses has an associated Campus Foundation that is a separately incorporated California non-profit public benefit corporation.
So a non-profit entity accumulated $4B, okay. Then they decided to gamble with it, rather than reducing costs for participants or improving equipment or funding research. Maybe I didn’t read a footnote in the definition of 501(c)(3) that said, the meaning of “non-profit” is that you have to be creative about withdrawing or using the accumulated funds.
Secondly, the risk-free rate right now is about 4.4% and every money market fund is putting funds into shorter term instruments. Compare and contrast that with Blackstone’s “guarantee” of a 11.25% annualized return for 6(!) years. Compare and contrast that with average stock market return for all of history: ~ 12%.
Thirdly, since we are in the beginning of a real-estate de-valuation and/or bubble pop, the timing of the deal raises no suspicion. The capital injection goes into Blackstone’s REITs, which is real estate. California real estate is already 10% down from recent highs and positioned to go lower. It’s only natural to negotiate a little capital injection from a non-profit into a real estate asset manager.

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