Profit From The Greed And Stupidity Of Others

History is about to repeat itself.  The tide of liquidity is slowly drifting out and this cycles frauds and scams will reveal themselves soon.  Look to companies that rely on the capital markets to fund their growth as Wall Street is a willing accomplice in looking the other way due to the fees collected.  – Enron Memories:  A Cautionary Tale

I would again urge everyone to go see “The Big Short.”  I plan on going to see it again.  The on-screen rendition is that powerful and well-acted.   It explains in “layman” terms what happened.  For those who put their thinking cap on, the movie explains why what happened is happening again – in a re-packaged form.

While everyone is focused on Amazon’s news report that it added 3 million subscribers in the 3rd of December and had record package shipments this holiday season, causing the stock to pop up despite the sell-off in the S&P 500, I am focused on the truth.  Of course AMZN had 3 million Prime subscribers right before Christmas.  Why?  AMZN was offering a one-month free trial to Prime.  If you had not shopped yet for Christmas and had 2-day free shipping dangled in front of you – for free – of course you’re going to sign up.

Let’s see the “churn and burn” rate for the people who have subscribed to the free-trial promotion.  I can guarantee you that AMZN will not publish those numbers.

Record shipping?  Economic theory teaches us that when something has no cost, demand is infinite until saturated.  I know people in NYC who bought toilet paper and paper towels from AMZN because free delivery is cheaper than taking a cab to the grocery store.  And who wants to schlep big armloads for grocery supplies around the streets of NYC?

Markets become irrationally overvalued because, in general, people have a tendency to overprice “hope” and “optimism.” It’s human nature to deny the negative side of reality. As a result, the market tends to “under-price” the probability of a negative outcome. This dynamic presents opportunity for those willing to examine the truth.  – Short Seller’s Journal

What is missed on this is that AMZN loses money on its Prime membership business.  It has admitted this.  But the push up in the stock price greatly benefits Jeff Bezos, as he automatically unloads 100,000’s of shares every month.

I will have a lot more to say about AMZN and the retail sales report out from Mastercard later this week.  I have had added a new feature to my Short Seller’s Journal called “Quick Hits,” which presents a short term, short-scalp trading idea.  The idea presented in this week’s report is down $1 (1.3%) already.  The put option suggestion is up 40%.  I believe this idea has at least another $1 of downside before Thursday’s option expiration. Click on this link to to subscribe:   SHORT SELLER’S JOURNAL.

This week’s report also presents what I believe to one of the best ways to short the corporate and mortgage bond market, especially the high yield market.

One thought on “Profit From The Greed And Stupidity Of Others

  1. From Mike B:

    Hi Dave. Nice work over at Seeking Alpha and IRD. I see we are going into overtime with the great sucker bowl. The seats are almost emptied in the VIP boxes but the stands are almost full. Thanks. And this wouldn’t go up:

    Into the furthest reaches of surreal,
    Probe men forbidden to think, speak or feel.
    Embedding codes into backdoor machines,
    Hot money pools drain all channels offscreens,
    But space junk will be the coldest raw deal.

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