Category Archives: Market Manipulation

Financial Market Collapse: Not an “IF” But A “When?”

“’DON’T PANIC!!!!’ Just 6.9% off of the most offensive valuation extreme in history.” – Tweet from John Hussman, Hussman Funds

The above quote from John Hussman was a shot at the financial media, which was freaking out over the sell-off in the stock market on Wednesday and Thursday last week. As stock bubbles become more irrational, the rationalizations concocted to explain why stocks are still cheap and can go higher become more outrageous. The financial media was devised to function as a “credible” conduit for Wall Street’s deceitful, if not often fraudulent, sales-pitch.

Perhaps the biggest fraud in the last 10 years perpetrated on investors was the Dodd-Frank financial “reform” legislation. The Dodd-Frank Act was promoted by the Obama Government as legislation that would protect the public from the risky and often fraudulent business practices of the big financial institutions – primarily the Too Big To Fail Banks. It was supposed to prevent another 2008 financial crisis (de facto financial collapse).

However, in effect, the Act made it easier for big banks to disguise or hide their predatory business operations. Ten years later it is glaringly apparent to anyone who bothers to study the facts, that Dodd-frank has been nothing of short of a catastrophic failure. Debt, and especially risky debt, is at record levels at every level of the economic system (Government, corporate, individual). OTC derivatives are at higher levels than 2008. This is without adjusting for accounting changes that enabled banks to understate their derivatives risk exposure. The stock market bubble is the most extreme in history by most measures and housing prices as a ratio to household income are at an all-time record level.

A lot of skeletons in the closet suddenly pop out of “hiding” when the stock market has a week like this past week. An article published by Bloomberg titled, “A $1 trillion Powder Keg Threatens the Corporate Bond Market” highlights the fact that corporate America took advantage of the Fed’s money printing to issue a record amount of debt. Over the last couple of years, the credit quality of this debt has deteriorated. More than 50% of the “investment grade” debt is rated at the lowest level of investment grade (Moody’s Baa3/S&P BBB-).

However, the ratings tell only half the story. Just like the last time around, the credit rating agencies have been over-rating much of this debt. In other words, a growing portion of the debt that is judged investment grade by the ratings agencies likely would have been given junk bond ratings 20 years ago. In fact, FTI Consulting (a global business advisory firm) concluded based on its research that corporate credit quality as measured by ratings distribution is far weaker than at the previous cycle peaks in 2000 and 2007. FTI goes as far as to assert, “it isn’t even close.”

I’ll note that FTI’s work is based using corporate credit ratings as given. However, because credit ratings agencies once again have become scandalously lenient in assigning ratings, there are consequences from relying on the judgment of those who are getting paid by the same companies they rate. In reality, the overall credit quality of corporate debt is likely even worse than FTI has determined.

The debt “skeleton” is a scary one. But even worse is the derivatives “skeleton.” This one not only hides in the closet but, thanks to regulatory “reform,” it’s been stashed in the attic above the closet. An article appeared in the Asia Times a few days ago titled, “Has The Derivatives Volcano Already Begun To Erupt?” I doubt this one will be reprinted by the Wall Street Journal or Barron’s. This article goes into the details about the imminent risk of foreign exchange derivatives to the global financial system. There’s a notional amount of $90 trillion in FX derivatives outstanding, which is up from $60 trillion in 2010.

Many of you have heard about the growing dollar “shortage” in Europe and Japan. Foreign entities issue dollar-denominated debt but transact in local currency. FX derivatives enable these entities to swap local currency for dollars with banks. However, these banks have to borrow the dollars. European banks are now running out of capacity to borrow dollars, a natural economic consequence of the reckless financial risks that these banks have taken, as enabled by the Central Bank money printing.

As it becomes more difficult for European and Japanese banks to borrow dollars, it drives up the cost to hedge local currency/dollar swaps. Compounding this, U.S. banks with exposure to the European banks are required to put up more reserves against their exposure, which in turn acts to tighten credit availability.  It’s a vicious self-perpetuating circle that is more than partially responsible for driving 10yr and 30yr Treasury bond yields higher recently.  Perhaps this explains why the direction of the Dow/SPX and the 10-yr Treasury have been moving in correlation for the past few weeks rather than inversely.

But it’s not just FX derivatives. There’s been $10’s of trillions on credit default swaps underwritten in the last 8 years. The swaps are based on the value of debt securities. For instance, Tesla bonds or home mortgage securities. As the economy deteriorates, the ability of debtors to service their debt becomes compromised and the market value of the debt declines. As delinquencies turn into defaults, credit default swaps are exercised. If the counter-party is unable to pay (AIG/Goldman in 2008), the credit default swap blows up.

And thus the fuse on the global derivatives bomb is lit. The global web of derivatives is extremely fragile and highly dependent on the value of the assets and securities used as collateral. As the asset values decline, more collateral is required (a “collateral call”). As defaults by those required to post more collateral occur, the fuses that have been lit begin to hit gunpowder. This is how the 2008 financial crisis was ignited.

In fact, given the financial turmoil in Italy, India and several other important emerging market countries, I find it hard to believe that we have not seen evidence yet of FX derivative accidents connected to those situations. My best guess is that the Central Banks have been able to diffuse derivative problems thus-far. However, the drop in the stock market on Wednesday surely must have triggered some equity-related derivatives mishaps. At some point, the derivative fires will become too large s they  ignite from unforeseen sources – i.e.the derivatives skeletons come down from hiding in the attic – and that’s when the real fun begins, at least if you are short the market.

I would suggest that the anticipation of an unavoidable derivatives-driven crisis is the reason high-profile market realists like Jim Rogers and Peter Schiff have recently issued warnings that the coming economic and financial crisis will be much worse than what hit in 2008.

Netflix’s Giant Ponzi Scheme

A colleague/friend asked today how I thought the “FANG saga” would end.  I replied that I don’t know about GOOG and FB, but AMZN is maybe worth $50/share as it burns cash every quarter despite manufacturing GAAP “net income” so it’s hard to tell for sure – it could be worth less.  NFLX is eventually going to have to restructure its debt, which means the equity is worth zero.

NFLX soared $50 after-hours today after it reported an earnings “beat” for its Q3.  But, per its statement of cash flows, NFLX’s operations burned $690 million for the quarter, 33% more than Q2 and nearly triple the operations cash burn in Q1.  For the first nine months of 2018, NFLX’s operations have incinerated $1.45 billion.   You can see the numbers here:  NFLX Q3 financial statements.  Note:  NFLX uses an unconventional method of reporting its financials, posting them to its website in a read-only spreadsheet format that makes it a pain in the ass to read and analyze the numbers.

How does NFLX manage to show positive net income yet burn hundreds of millions of dollars each quarter?  It’s the magic of GAAP accounting.  I did a detailed analysis for my Short Seller’s Journal subscribers last year.  Each quarter NFLX has to spend $100’s of millions on content.  Most companies like NFLX capitalize this cost and amortize 90% of the cost of this content over the first two years.   Amortizing the cost of content purchased is then expensed each quarter as part of cost of revenues.  Companies can play with the rate of amortization to lower the cost of revenues and thereby increase GAAP operating and net income.

Of course, the accounting “devil” is always in the details of the cash flow statement, which Wall Street, financial media and bubble-chasing stock jockeys never bother to read.  While NFLX shows increasing operating and net income each quarter on the income statement, it also shows a big increase in cash burn from operations each quarter.  The cash burn is from money spent on content.  The net income is generated by reducing the amount of content expense amortization each quarter relative to the amount spent on content each quarter.  Despite the stock market-charming earnings “beat” each quarter, NFLX’s cash outflow exceeds cash inflow each quarter.  In simple terms, NFLX is a giant Ponzi scheme.

In the analysis I did for my subscribers in July 2017, I demonstrated this accounting Ponzi mechanism:

The ratio of cash spent on content in relation to the amount recognized as a depreciation expense can be used to determine if NFLX is “stretching out” the amount depreciation recognized on its GAAP income statements in relation to the amount that it is spending on content. In general, this ratio should remain relatively constant over time.

For 2014, 2015 and 2016, this ratio was 1.42, 1.69 and 1.80 respectively. When this ratio increases, it means that NFLX is spending cash on content at a rate that is greater than the rate at which NFLX is amortizing this cash cost into its GAAP expenses. If NFLX were using a uniform method of calculating media content depreciation, this number should remain fairly constant across time. However, as content spending increases and GAAP depreciation declines relative to the amount spent, this ratio increases dramatically – as it has over the last three years. A rising ratio reflects the fact that NFLX has lowered the rate of depreciation taken in the first year relative to previous years. It does this to “manage” expenses lower in order to “manage” income higher.

In the first nine months of 2018, this ratio was 1.70, which explains largely why NFLX’s rate of GAAP “earnings” growth is declining.

To pay for its massive cash flow burn rate, NFLX has to continually issue more debt and stock.  Earlier this year NFLX issued nearly $2 billion in junk bonds.   For the full year 2014, NFLX had $5.5 billion in revenues, its operations generated positive $16.5 million in cash. The Company had $900 million in debt and $3 billion in non-current content liabilities.  Fast forward to Q3 2018.  The Company has $14.7 billion in LTM revenues and the operations incinerated $1.93 billion LTM.  NFLX has $8.3 billion in long term debt, and $8.1 billion in content liabilities.   Debt and content liabilities tripled.

Liabilities and debt obligations are growing faster than revenues and cash flow burn, the latter of which grows at a double-digit rate every quarter – sequentially.  Cash out is growing at a faster rate than cash in.  The difference is made up by borrowing from investors. This is the definition of a Ponzi scheme.

The problem with NFLX’s business model is that it keeps its subscription rate low enough to attract new subscribers every quarter at a rate that gives Wall Street and stock-jockeys a Viagra-induced erection.  But NFLX does not charge enough for its product to cover expenses.  If NFLX were to raise the cost of what it sells to a level that would cover its expenses, its subscriber-count would plunge.

NFLX exists thanks to the massive amount of money printed by Central Banks globally, which has injected more cash into the financial system than investors know what to do with.  That’s enabled NFLX to continue floating debt.  But this game is  coming to an end and it’s only a matter of time before NFLX stock  crashes and burns.

This is why insiders have been dumping stock indiscriminately.   They were unloading shares up until October 11 – three business days ago – presumably the last day before the earnings blackout.  I don’t care if the sales are “automatic.” If insiders thought the stock deserved to go higher, or was not going lower, they would turn off of the “automatic” sell switch. In the last three months alone, insiders have dumped over 400,000 shares and bought zero.  Follow the money…

Gold Going Higher – Mining Stocks Are Historically Cheap

It’s important to keep in mind that the mining stocks have been sold to levels well-below their intrinsic value – in the case of larger-cap producing miners. Or their “optionality” value – in the case of junior mining companies with projects that have a good chance eventually of converting their deposits into mines. “Optionality” value is based on the idea that junior exploration companies with projects that have strong mineralization or a compliant resource have an implied value based on the varying degrees of probability that their projects will eventually be developed into a producing mine.

In relation to the price of gold and silver, the mining stocks generically (i.e. the various mining stock indices like the HUI or GDX) have rarely traded at cheaper levels than where they are trading now.

Bill Powers invited me on to his Mining Stock Education podcast to discuss why the price of gold and silver is going higher and why the mining stocks are historically undervalued:

In the next issue of the Mining Stock Journal, I dissect my favorite junior mining stock ideas. These are stocks that have unreasonably sold-off and have at least 10-bagger potential. You can learn more about this here:  Mining Stock Journal information.

The Cracks In The Market’s Floor Grow Wider

“The only time we’ve ever seen a confluence of risk factors anywhere close to those of today was the week of March 24, 2000, which marked the peak of the technology bubble.” – John Hussman, Hussman Funds, in his October Market Commentary

The yield on the 10-yr Treasury has broken out, hitting its highest level since July 2011:

By the end of June 2011, the Fed had only reached its half-way mark in money printing. It was shortly thereafter that the Fed had implemented its “operation twist.” Operation twist consisted of selling the Fed’s short term holdings and using the proceeds plus extra printed money to buy Treasuries at the long-end of the curve – primarily 10-yr bonds. That program is what drove the 10-yr bond yield from 3.40% in July 2011 to as low as 1.33% by mid-2016. At one point the Fed owned more than 50% of all outstanding 10-yr Treasuries. The Fed’s massive money hyper-stimulated the housing and auto markets.

What should frighten market participants and policy-makers – and really, everyone – is that the 10-yr yield has soared the last Thursday and Friday despite the big sell-off in the Dow/SPX. I say “despite” because typically when stocks tank like that, the money flows into Treasuries as a “flight-to-safety” thereby driving yields lower. When stocks drop like last Thursday and Friday in conjunction with the sharp rise in the 10-yr yield (also the 30-yr yield), it reflects the development of financial market problems that are not superficially apparent.

The media narrative attributed Friday’s jump in Treasury yields to the “strong” jobs report. But this is nonsense. The number reported missed expectations. Moreover, the number of working age people “not in the labor force” rose to an all-time high,which is indicative of substantial slack in the labor market.

More likely, yields are soaring on the long end of the curve (10yrs to 30yrs) because it was quietly reported that the amount of outstanding Treasuries jumped by $1.25 trillion in the Government’s 2018 Fiscal Year (October thru September). This means that the Government’s spending deficit soared by that same amount during FY 2018. To make matters worse, the Trump tax cut will likely cause the spending deficit – and therefore the amount of Treasury issuance required to cover that deficit – to well to north of $1.5 trillion in FY 2019.

Who is going to buy all that new Treasury issuance? Based on the Treasury’s TIC report, which shows major foreign holders of Treasury securities, over the last 12 months through July (the report lags by 2 months), foreign holdings of Treasuries increased by only $2.1 billion. The point here is that, in all likelihood, the biggest factor causing Treasuries to spike up in yield is the market’s anticipation of a massive amount of new issuance. Secondarily, the rising yields likely reflect the market’s expectation of accelerating inflation attributable to the deleterious consequences of the trade war and the lascivious monetary policies of the Fed. The market is assuming control of interest rate policy.

On Tuesday last week (October 3rd), the Dow closed at a record high (26,828). Yet, on that day three times as many stocks in NYSE closed at 52-week lows as those that closed at 52-week highs. Since 1965, this happened on just one other day: December 28, 1999. The Dow peaked shortly thereafter (11,722 on January 10, 2000) and began a 21 month sell-off that took the Dow down 32%.

I don’t necessarily expect to see the stock market tank in the next few weeks though, based on watching the intra-day trading action the past couple of weeks leads me to believe that the market is vulnerable at any time to a huge sell-off. The abrupt spike in Treasury yields plus market technicals – like the statistic cited above – lead me to believe that the cracks in the stock market’s “floor” are widening.

The above commentary is an excerpt from the latest Short Seller’s Journal. In that issue I presented LULU as short at $153. It’s already dropped $8 and several subscribers and I have more than doubled our money on put ideas.  You can learn more about this newsletter here:  Short Seller’s Journal information.

The Tragically Flawed Fed Policies And The Eventual Reset Of The Gold Price

With gold showing good resiliency as it has tested the $1200 level successfully after enduring aggressive paper gold attacks during Comex floor trading hours, it’s only a matter of time before gold breaks out above $1220 and heads toward $1300. Gold has been under attack in the futures market this week as the world’s largest physical gold importer, China, has been closed all week for holiday observance. In addition, with financial market conditions stabilizing in India, the world second largest physical gold importer’s peak gold buying season resumed this week. When gold spikes over $1220, it will unleash an avalanche of short-covering by the hedge funds.

What will cause gold to spike up? There’s any number of potential “black swans” that could appear out of nowhere, but the at the root of it is the tragically flawed monetary policies of the Federal Reserve, along with the rest of the Central Banks globally…of course, the eastern hemisphere banks are buying gold hand-over-fist…

Chris Marcus invited me onto this StockPulse podcast to discuss the precious metals market and the factors that will trigger an eventual price-reset:

The SEC Settlement With Musk: Crime Pays Once Again

“…when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Francisco D’Anconia’s Money Speech, “Atlas Shrugged”

The SEC ended up settling with Elon Musk for violating securities laws with his “funding secured” tweet. Musk and Tesla will each pay $20 million in fines and Musk will be barred from acting as Chairman of Tesla but will remain CEO. I doubt the SEC will investigate to what extent, if any, Musk and his family and friends took advantage by accumulating stock and call options ahead of Musk’s tweet, which triggered an $87 move higher in the stock price. Certainly we know Musk and his family controls an offshore stock account in the Cayman Islands.

Thirty years ago, Musk would have been forced to serve jail time for securities law violations. Ask Michael Milken and Ivan Boesky about that. The last time a corporate CEO was incarcerated for securities laws violations was Qwest’s Joe Nacchio in April 2007.

Notwithstanding the fact that Musk remains CEO of Tesla, the Company is on a path toward insolvency within 12-18 months. Just like Enron’s auditors before it, I’m sure Price Waterhouse will have no problem cooking up financial statements for Q3 which show a GAAP-manipulated profit of some sort. But make no mistake, rigged GAAP accounting can not change the fact Tesla continues burning billions in cash – nearly $2 billion in the first six months of 2018 between operating activities and investing activity.

I’m hopeful the Justice Department investigation of Musk and Tesla will produce results that are more reflective of Rule of Law than the SEC delivered. Clearly the SEC has once again sent the message to the world that crime pays in the United States if you have a bank account large enough to cover the tab. But, at the end of the day, the fate of Tesla is subject to the Laws of Economics. That is a battle Musk and Tesla have no hope of winning.

What a fucking comical charade. They take a slam dunk case and settle??? At least now we know how serious they are about prosecuting securities fraud among the privileged few. And people wonder how Madoff could get away with such a gigantic heist for so long??? Seems pretty clear the rules are set up to protect the elite crooks in our financial system. – Short Seller’s Journal  subscriber

The Fed: Lies, Propaganda And Motive

The agenda of the Fed is to hold up the system for as long as possible. The biggest stock bubble in U.S. history has been fueled by 10 years of negative real interest rates. The only way to justify that policy is to create phony inflation statistics. Based on historical interest rates and based on the alleged unemployment rate, a “normalized” Fed funds rate should be set at 9%, which reflects a more accurate inflation rate plus a 3% premium. The last time the unemployment rate was measured at 3.7% was October 1969. Guess what? The Fed funds rate was 9%. I guess if you live an a cave and only buy TV’s and laptops, then the inflation rate is probably 2%…

Silver Doctor’s Elijah Johnson invited me to discuss the FOMC policy decision released on Wednesday afternoon:

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If you are interested in ideas for taking advantage of the inevitable systemic reset that  will hit the U.S. financial and economic system, check out either of these newsletters:  Short Seller’s Journal information and more about the Mining Stock Journal here:  Mining Stock Journal information.

Tilray: Little More Than A Stock Bubble Scam

Tilray could well become the poster-child stock of the biggest stock bubble in U.S. History.

This past summer Tilray (TLRY) went public (July) at $17 per share. TLRY is a Canada-based medical marijuana company. While its operations are targeting the international medical marijuana market, the Company generated just $9.7 million in revenues in its Q2 2018. It produced a net loss of $12.8 million. The stock had run from $30 on August 20th to
a close of $120 on September 17th. The stock jumped again the next day to $154 on newsthat the DEA granted the approval for Tilray to provide THC capsules to UC San Diego for a clinical trial on the medicinal use of THC/CBD.

At the close of trading last Tuesday, TLRY’s market cap reached $14.1 billion, despite the fact the the UC San Diego deal would provide little in the way of revenues. Wednesday the stock soared to as high as $300 – a $27.6 billion market cap. TLRY did $17 million in revenues for the first-half of 2018. Let’s double that for the next 6 months and give them credit for a forward 12-month revenue stream of $68 million, which is more than generous. That means at Wednesday’s peak, TRLY was trading at 405x forward revenues. But from Q2 2017 to Q2 2018, its operating loss nearly quintupled, from $2.3 million to $11 million. We don’t know to what extent, if ever, this business model will be profitable.

Tilray closed just below $100 on Monday. On Tuesday the stock jumped $17, adding $1.5 billion to its market cap on the “news” that the Company “successfully” delivered CBD capsules to 29 “critically ill children” at a hospital in Victoria, Australia. There was no mention of revenue or profit impact of this “event,” which means this “feat” will be an expense item. Funny thing about CBD products, they are egally available in high concentration capsules and tinctures to anyone. See Ambary Gardens, for instance.

Marijuana was approved for medical use in Colorado in 2008. It was approved for recreational use in 2012. From 2008 to present, the retail price for “top shelf” weed has gone from $350 per ounce to as low as $150 per ounce. Once marijuana is legalized in a jurisdiction, the barrier to entry for producers and distributors is low. This means that, over
time, the selling price of marijuana will begin to approach the cost of production plus the cost of distribution plus a small profit incentive for growers and distributors. I have to believe the big tobacco companies are waiting impatiently for the Federal Government to legalize marijuana out of desperation to generate tax revenues. Then it’s game-over for existing growers.

TLRY’s operating loss including non-cash stock compensation was $14.7 million in the first half of 2018. Net of the huge jump in accounts payable, TLRY’s operations burned $11 million in cash in the first 6 months of 2018. TLRY insiders are sitting on 83 million of the 92 million shares outstanding. I’ll be curious to see how quickly insiders begin to register their shares and unload them. It’s only a matter of time before ground-floor investors try to quietly unload shares. They are idiots if they don’t.

The point here is that, while the run-up in stocks like Tesla and Netflix has been absurd, the trading action is Tilray has been absolutely insane. As it turns out, with only 17.8 million shares in the public float, TLRY has been engulfed by a vicious short-squeeze made even worse by momentum-chasing hedge fund algos and day-traders. Buyers blindly chasing the price higher, driven by fearless greed and the expectation that they will be able to unload their stock purchase on the next buyer willing to pay even more for the stock in complete disregard to valuation considerations.

This is very similar to the early 2000 dot.com/tech stock bubble. Tilray’s price rise to $300 is similar to rise in Commerce One. I was short CMRC at $200/share, which at the time was a completely irrational valuation. CMRC then ran quickly up to $600. But $600 was the top and it fell off a cliff from there.

Fundamentals Supporting Stock Market Further Deteriorate

The Bureau of Economic Analysis calculates and publishes an earnings metric known as the National Income and Products Accounts which presents the value and composition of national output and the types of incomes generated in its production. One of the NIPA accounts is “corporate profits.” From the NIPA handbook: “Corporate profits represents the portion of the total income earned from current production that is accounted for by U.S. corporations.”

The BEA’s measurement of corporate profits is somewhat similar to using operating income from GAAP financial statements rather than net income. The BEA is attempting to isolate “profits from current production” from non-production noised introduced by GAAP accounting standards. “Profits from current production provide a comprehensive and consistent economic measure of the net income earned by all U.S. corporations. As such, it is unaffected by the changes in tax laws, and it is adjusted for non-reported and misreported income” (emphasis is mine).

Why do I bring this up – what is the punch line? Because the NIPA measurement of corporate profits is currently showing no growth. Contrast this with the net income “growth” that is generate from share buybacks, GAAP tax rate reductions and other non-cash GAAP gimmicks used to generate GAAP net income on financial statements. This does not surprise me because I use operating income when judging whether or not companies that are reported as “beating” estimates are “beating” with accounting gimmicks or actual products derived from the underlying business.

It’s quite easy for companies to manufacture net income “beats.” But it’s more difficult – though possible – to manipulate operating income. The deferment of expenses via capitalizing them (taking a current cost incurred and sticking it on the balance sheet where the cost is amortized as an expense over time) is one trick to manage operating income because expense capitalization reduces the quarterly GAAP expense that is connected to that particular expenditure (capex, interest, etc).

The point here is that corporate operating profits – or “profits from production” per the BEA – are not growing despite the propaganda from Wall Street and the President that the economy is “booming.” Furthermore, if we were to adjust the BEA numbers by a true inflation number, the resulting calculation would show that “real” (net of price inflation) corporate profits have been declining. Using this measure of corporate profitability as one of the measures of economic health, the economy is not doing well.

August Auto Sales – August auto sales reported the first week of September showed, on a SAAR (Seasonally Adjusted Annualized Rate basis), a slight decline from the July SAAR. The positive spin on the numbers was that the SAAR was 0.4% percent above August 2017. However, recall that all economic activity was negatively affected by the two huge hurricanes that hit south Texas and Florida. The SAAR for this August was reported at 16.5 million. This is 11.2% below the record SAAR of 18.6 million in October 2017. It was noted by LMC Automotive, an auto industry consulting firm, that “retail demand is deteriorating” (“retail” is differentiated from “fleet” sales). Sedan sales continue to plummet, offset partially by a continued demand for pick-up trucks and SUVs.

Casting aside the statistically manipulated SAAR, the industry itself per Automotive News reported 1.481 million vehicles sold in August, a number which is 0.2% below August 2017. In other words, despite the hurricane-depressed sales in August 2017, automobile manufacturers are reporting a year over year decline in sales for August. This was lead by a stunning 12.7% drop in sales at GM. I’ll note that GM no longer reports monthly sales (only quarterly). But apparently an insider at GM fed that number to Bloomberg News.  Automotive News asterisks the number as “an estimate.” Apparently GM pulled back on incentives. On a separate note, I’m wondering what will happen to consumer discretionary spending if the price of gasoline continues to move higher. It now costs me about 35% more a year ago to fill the tank in my car.

The commentary above is an excerpt from the latest Short Seller’s Journal.  I  recommended shorting GM at $42 in an early November 2017 issue of the Short Seller’s Journal. It hit $34 earlier this past week. That’s a 19% ROR over the time period. In the last issue of the Short Short Seller’s Journal, I recommended shorting Wayfair (W) at $149.92, last Friday’s close. W is down $3.50 – or 2.3% – despite the rising stock market. My recommendation include put option ideas You can learn more about this newsletter here:  Short Seller’s Journal Information