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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

March 27, 2009 at 10:35 AM

Suddenly, Amazon gets its recession pop quiz

Top of the News: Has Amazon finally lost its race against the recession? News that it will close three distribution warehouses — which in priceless biz jargon it calls “order fulfillment centers” — raises the question. This is a company that built its reputation on being lean and efficient, so all this distribution space wasn’t built with the same “expand to the moon” mindset of another Seattle company I could mention. Amazon is going forward with a big distribution center in metro Phoenix…still…

At the least, it’s a defensive move. This downturn has tested everybody’s business plan with the devil’s pop quiz. Now it’s Amazon’s turn. But investors pulled back on Amazon shares and Kaufman Brothers started coverage of its shares with a “hold” rating. Some relief comes from news that consumer spending has begun a tentative rebound. Emphasis on the word “tentative.” As long as job losses each month keep hitting 500,000 and more states see unemployment rates above 10 percent, people aren’t going to be willing to spend, even for Amazon.

The Back Story: I hate to “sun” on the parade (as we said in Phoenix), but the next big shock to the system may come from commercial real-estate. The sector’s already seen a big pullback, as can be seen around downtown Seattle and even in the ‘burbs.

But now the delinquency rate on securitized loans for office buildings, retail developments, stores and other investment property has more than doubled since last September, to 1.8 percent. We’re talking about $700 billion. How bad is it? The $8 billion CityCenter project in Las Vegas is considering seeking bankruptcy protection, and it’s not even open. There’s concern that hundreds of banks with heavy exposure to commercial real estate could fail. Mr. Geithner, call your office.

Today’s Econ Haiku:

Oh to listen in

Big bankers meet Obama

A chat among friends

Comments | More in Consumer spending, Real estate

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