Envelopes We Know. Mortgages? Not So Much.

A Citigroup analyst recently wrote a report to its investors recommending that they sell stock in Netflix and instead buy Blockbuster. The report hinged on a recent audit of the Postal Service by the U.S. Inspector General’s office. That audit found the Postal Service has to spend $21 million per year on hand sorting envelopes that will not go through the automated sorting machines.

The Citigroup report notes that the most likely offender in this problem is Netflix’s return mailer for DVD rentals–70% of the mailers’ adhesive strips gum up the sorting machines and have to be sorted by hand. Netflix has 7 million subscribers, so you can see where the blame will be placed. Citibank also notes that Blockbuster seems to have designed a return mailer that doesn’t screw things up.

Since the Inspector General is suggesting a 17 cent surcharge on all hand-sorted mail, if Netflix doesn’t fix its envelopes it will lose approximately 67% of it’s revenue, falling from revenues of $1.05 to $0.35 per subscriber.

Two thoughts on this:

1) Fix the goddamn envelopes.

2) Citigroup investment strategy can get this detailed on arcane things like the envelopes used to return DVD’s–but it can’t figure out that sub-prime mortgage loans with exotic terms, no collateral and little-to-no information on buyer finances may not be such a good thing: either for Citigroup or the nation?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s