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Bill Gunderson @billgunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his... More
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Best Stocks Now! Summer 2011 edition
  • Rain and Sleet Cannot Stop Post Office. $25 Billion Loss Just Might by Bill Gunderson 0 comments
    Jul 1, 2011 10:27 AM

    Rain and Sleet Cannot Stop Post Office.
    $25 Billion Loss Just Might
    by Bill Gunderson
    PWstreet.com

     

    From their famous landmark Post Office building, New Yorkers know that not even “snow nor rain nor heat nor gloom of night” can stop the mailman.

     

    But losing $25 billion over the last four years just might.

     

    The news from the Post Office is almost as bad as it can be. And getting worse. Everything that should be going up -- like revenues and mail delivered -- is going down. 

     

    Everything that should be going down like expenses, losses and  employee benefits -- is going up.

     

    A few numbers for the non-believers: Over the last three years, the United State Postal Service has lost $15 billion. Count this year and the total goes to $25 billion.

     

    First class mail is down 20 percent.

     

    Fewer people, costing more: About 10 percent fewer people work there, but employee pay expenses rose 10 percent, mostly from crushing pension and medical expenses.  

     

    The Post Office complains the Congress mandates it pay $5 billion a year in pre-funded health benefits for retirees. Government agencies do not like it when they have to obey the same rules as the rest of us.

     

    Of the 36,000 post offices in America, fully half are operating at a deficit. The USPS is acting to close 2450 of them. They have been losing money a long time. Think of them as mini-military bases that no one wants to close.

     

    Now we have 16,000 to go. And no plans for anything except more of the same: More employees at headquarters. More losses. More putting off the truth that there is no end in sight to bad news for the Post Office. 

     

    ObamaCare preview, anyone?

     

    There are, however, plenty of alternatives.

     

    FedEx and UPS are hiring people and making money -- $12 billion over the last three years. Not too shabby when your competitors get a $25 billion subsidy -- and do not pay taxes.

     

    DHL had to shut its American operations two years ago. They had to pay real money. And real taxes.

     

    FedEx and UPS are opening and closing offices, hiring and firing workers, delivering or not delivering packages at a rate they want to charge -- All without asking permission from the local member of Congress.

     

    All despite the fact that the USPS has a legal monopoly to your mail box and to all non-urgent overnight deliveries.

     

    You did not know you could be “fined or imprisoned or both” if you sent non-urgent letter -- such as a birthday card -- via FedEx or UPS?

     

    Now you do: in  Postal inspectors caught one company using FedEx for non urgent mail and fined it $300,000.

     

    I am surprised how little is heard from the one group these postal subsidies hurt more than any other: Newspapers.

     

    Much of the display advertising that used to be delivered in the morning or afternoon paper is now delivered by your friendly neighborhood postman as a piece of “direct mail.’ 

     

    All the grocery store ads, the car dealer specials, all largely gone. Now delivered to your home not through newspaper, but through their subsidized competitors at USPS.

     

    No wonder so many newspapers are losing money and laying off workers: The same day last week Gannett announced it was laying off 700 workers the USPS announced it would lose $10 billion this year.

     

    Here’s a modest proposal: Instead of borrowing money to subsidize competitors to American companies, let’s just stop.

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