Tag Archives: Amazon Prime

A Preposterous Jobs Report And Preposterous AMZN Earnings

On a trailing twelve month quarterly basis, AMZN’s operating income growth has plunged from 30.2% in Q2 2015 to just 3.6% in Q4 2016.  This is a stunning drop in growth considering that AMZN’s stock is trading at 92x operating income and 134x net income. That’s before accounting manipulations are stripped away.

The fake news abounds.  It’s seeping from cracks in every part of the U.S. system.  It’s one of the hallmarks of a collapsing economic and social system and, even worse, the onslaught of totalitarianism.   Orwell’s vision was stunningly prophetic.  Of course, he was simply reconstituting history and warning us about the lessons which everyone seems to forget.

The latest non-farm payroll report, the data for which is compiled by the Census Bureau and manufactured into fake news by the Bureau of Labor Statistics, wants us to believe that the economy produced 227,000 jobs in January.  If you look at the “not seasonally adjusted” employment numbers, the number of people employed dropped by 1.25 million.

This is in an economy in which retail and auto sales plunged in January, which means retailers and domestic OEM’s cut back on employment – two major sources of employment in the economy.

In fact, according to the BLS fake news jobs report, “retail trade” was largest component of job “adds” in January. This is quite interesting given that retailers have been dumping employees en masse plus big box and mall anchor concepts like Macy’s are shuttering stores by the 100’s.  In short, that statistic is simply not credible nor supported by the facts. By the same token, auto manufacturers have been cutting shifts and shuttering production lines, as dealer inventories are ballooning and used car prices are plummeting, with a flood of low-mileage, well-maintained leased cars coming off lease.

The BLS is making the claim that “construction” was the 2nd largest category of job adds in January.  No way.  An apartment building and commercial real estate glut has formed. The default rate on CMBS (commercial mortgage-backed securities) is climbing as loans mature and borrowers are unable to repay or refi them – LINK.  Furthermore, the issuance of CMBS in 2016 was the lowest in the last 4 years.  If commercial r/e loans are not being sourced and therefore projects are slowing down, how can construction employment increase?

Restaurant sales are in freefall – a fact of which I have detailed meticulously in my Short Seller’s Journal – which means the standard plug used to goal-seek a specific employment number,  part-time waitresses and bartenders, is a fraud.  Moreover, with wage growth slowing down and real inflation wreaking havoc on non-discretionary expense items, it would seem highly improbable that “leisure and hospitality” would be the 3rd biggest contributor to the employment rolls.

In short, the Government employment report is once again not even remotely credible. But this should be expected.  First, the Census Bureau’s data collection apparatus not only is called into question constantly, but the CB has been caught submitting fraudulent data collection reports.  Some of the data collectors decide to take extra long lunches or visit the pot dispensaries in States where applicable and then submit fraudulent reports rather than conduct actual data collection.   Then the BLS takes the questionable data and pushes it through a seasonal adjustments and annual benchmark revision meat grinder. The data goes in as rat poison and comes out as nuclear waste.

As for Amazon…Amazon is the archetypal accounting fraud poster child.  Whether or  not you are willing to accept my analysis of their accounting practices, let ‘s look just at some surface indicators that AMZN is running off the rails to nirvana.   I wrote a comprehensive report on AMZN in which I drilled down to the core of AMZN’s highly misleading accounting practices.  The report is dated by a year but the “proof of concept” is still valid – maybe even more valid now than over the past 10 years.  I’ll send a copy to anyone who subscribes to the Short Seller’s Journal (I’ll send a copy to existing subscribers along with Sunday’s weekly issue).  You can subscribe here:  Short Seller’s Journal.

AMZN’s quarterly revenue growth rate has been slowing for several quarters.  Its revenue growth rate peaked in 2011 at 41%.   Since Q3 2015 to Q4 2016, the year over year quarterly growth rate has slowed from 30% to 24%.  This is despite the heady growth rate attributed to its cloud computing division (AWS – which I eviscerate in the AMZN report).   Operating income is worse.  Over the last 6 quarters, its year over year quarterly operating income growth has plunged from 84% to 13%. This excludes F/X effects, the application of which would make it worse.  Net income?  Forget net income.  By the time the numbers flow through AMZN’s waterfall of misleading accounting practices, the net income number is completely useless and highly manufactured.  I detail this fact in the AMZN report.

AMZN’s AWS segement (cloud computing) is highly touted by Wall Street snake-oil salesmen.  Don’t poison your view by looking at AMZN’s highly massaged and highly misleading earning presentation slide-show.  Go directly to the SEC-filed 8K/10Q, which itself is riddled with suspect accounting.

The growth of AWS has slowed considerably and will continue to do so.  Especially if Trump cuts back on Deep State funding, which is significant source of revenues for AMZN’s cloud computing services.  On a year over year quarterly revenue growth basis, AWS’ sales growth has gone from 82% in Q2 2015 to 47% in Q4 2016.  It’s been nearly cut in half.  It’s not a scale phenomenon either, as its Q4 revenues for AWS were $3.5 billion, which was just 8% of total revenues for the quarter.  I can remember when Wall St. stock jockeys were forecasting an explosion in AWS’s contribution to AMZN’s revenues and income.   But AWS sales have been running between 7% to 9.5% of total revenues since Q2 2015.  It was 8% of revenues in the latest quarter.

I will say that AWS produced 73.7% of AMZN’s operating income in Q4.  But that’s more a damnation of AMZN’s retail sales business, if anything.  With $1.255 billion in total operating income, that means AMZN generated just $329 million of operating income on $40.1 billion of retail sales.  That’s a “sweltering” 0.8% operating margin (zero point eight percent).   For comparison purposes, Walmart and Target generate an operating margin of about 5% on similar product sales.  So much for the argument that cyber-sales are more profitable than “brick and mortar.”

There’s a lot more analysis that I can present showing the misleading to fraudulent nature of AMZN’s financials, but that’s for subscribers.  Suffice it to say that the Free Cash Flow number presented by Jeff Bezos every quarter in his ridiculous slide presentation is completely fraudulent except for that fact that he discloses deep in the bowels of the AMZN 10Q – a place where Wall Street analysts never venture – that AMZN’s definition of “free cash flow” is not based on generally accepted accounting principles.

Amazon Dot CON: The Bezos Con Grows With Revenues

The mainstream financial media headlines reporting Amazon’s Q2 earnings release were shamelessly pathetic:  “Amazon crushes Street forecast,” “Amazon beats again in Q2 thanks to cloud services.”  It was beyond nauseating.  The entire spectacle reminds me of the tech bubble, when companies like Cisco, Sun Microsystems and Intel would intentionally “guide” Street analysts into publishing a low consensus forecast the CFOs knew could easily be topped with accounting gimmicks.

Bezos applies all the traditional accounting gimmicks plus he’s created his own, Bezosspecifically with regard to his definition of “free cash flow.”

I don’t want to spend a lot of time on this.  I’ve wasted most of my evening untangling AMZN’s numbers as reported in its 8-K filing.  Let’s just say that if you dissect AMZN into its “product” and “AWS” components, the results are underwhelming.

Nothwithstanding the fact that AMZN intentionally guides the Street to low-ball estimates ahead of its quarterly earnings report, as you can see from the graphic below, which I created by dissecting and rearranging the sales and operating income numbers from AMZN’s 8-K filed today, AMZN’s growth numbers are underwhelming (click to enlarge):

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The sales growth rates for AMZN’s AWS (cloud computing) revenues and operating income are declining rapidly.  AWS is a new business started from scratch a few years ago.  Of course it’s going to show a high rate of growth initially.  But stock analysts and the mainstream financial media make it sound like AWS is a money tree.  Yahoo Finance reports that AWS is “massively profitable” LINK.

Well, look for yourself.  The sales growth on a year over year quarterly basis has dropped precipitously from 81.5% in Q2 2015 to 58.2% in the latest quarter. This is a rapid slowdown in growth.  The yr/yr quarterly growth rate for AWS operating income, which was $718 million in the latest quarter, has plunged from 407% to 83.6%.   “Massively profitable?”  You can see that AWS’ operating income actually declined from Q4 2015 to Q1 2016.  Declined.  Cloud computing services are not seasonal.  So that would not explain the drop.

Furthermore, AMZN does not disclose how much of its “technology and content” expenses are attributed to AWS.  But its total line-item cost for this in Q2 was $3.8 billion.  Yet, AWS’ total revenues for Q2 was $2.9 billion.  To be sure, a significant portion of that $3.8 billion in tech costs go with AMZN’s online product sales.  But it’s possible that none of the expense is amortized into AWS’ cost of sales.  Bezos won’t break that out.    He was doing a similar trick with “fulfillment” before the SEC forced AMZN to include fulfillment as a separate line item in the early 2000’s.

Let’s drill down into AWS’s numbers, to the extent that Bezos’ disclosures will allow:

AMZN AWS

The chart above shows the quarter to quarter growth rates for AWS.  Again, recall that cloud computing services are not seasonal.   From 2014 to 2015, AWS’ annual growth rate was 70%.  But on an LTM basis thru Q2 2016, that growth rate has collapsed to 26%.  With operating income the decline is even more dramatic.  From 2014 to 2015, operating income grew 182%.  But this growth rate on a quarter to quarter basis for Q2 2016 has plunged  to 19%.

Bezos is the master of deceptive presentation.  But as you can see, rearranging the numbers into a more traditional financial analysis format removes any “sizzle” Bezos imposes on the numbers and reveals that AWS’s growth rate is collapsing.

Circling back to the first chart, you can see that AMZN’s overall profit margin on 90% of its revenues base – its product sales – is more or less 2%.   This profit margin is less than half the profit margin of two of AMZN’s primary competitors, Walmart and Target.  In general, retailers produce 4-5% operating profit margins.  In other words, 90% of AMZN’s revenues significantly underperform that of AMZN’s competitors.

For this investors are paying a 186x trailing p/e for a business with a rapidly declining growth rate and profit margins well below average for retailers.

Finally, the Bezos’ shamelessly promoted Free Cash Flow metric  turns out to be borderline fraudulent.   In fact, buried deep inside the footnotes to AMZN’s SEC-filed 10-K/Q is a disclosure that states that the “free cash flow” number used in AMZN’s promotional slide is not a GAAP-derived number.

Why?  Because Bezos conveniently excludes the cash AMZN’s spends every quarter to pay for property and capital equipment that AMZN finances with capital leases.  He also excludes stock-based compensation, which turns out to account for about 50% of AMZN’s salary expense.   It’s highly misleading.   To give you an example, the very first slide which is shown in AMZN’s quarterly investor presentation is the  Bezos-concocted “Free Cash Flow” bar chart shown on a trailing twelve month basis:

Untitled

This is the very first slide Bezos hits the market with. Talk about shameless promotion, I’ve never seen anything like this in over 30 years of financial market experience. This is more absurd than any type of misleading hype that I saw in the junk bond market.   And I thought junk bond presentations stretched the limits of credibility.

But here’s the best part.  If you strip out the ongoing cash outflows used for capital equipment and building expenditures by AMZN each quarter for the last four quarters, that “free cash flow” of $7.3 billion LTM shrivels down to $2.5 billion.   THEN, if you net out stock-based compensation for the trailing twelve months, which is a GAAP number, that Free Cash Flow metric of Bezos’ disintegrates down to just $85 million.

Pundits will argue that capital lease payments are eventually non-recurring and therefore should not be included in a free cash flow calculation.  But that argument is entirely disingenuous and highly flawed because these payments have grown from $1.8 billion in 2013 to $5.4 billion on an LTM basis through Q2 2016.   I like to call these, sarcastically, recurring “non-recurring” expenses because it falls into the “non-GAAP” earnings category that every big corporation gets away with presenting now.  Bezos clearly stretches this to the limits of the imagination.

Now, Bezos’ promoters would argue that stock-based compensation is not a use of cash and therefore should not be included in the Free Cash Flow number.  But that is patently false.  Here’s why.  The definition of free cash flow is that amount of cash flow that is available to shareholders after all cash payments are accounted for.  With stock-based compensation, AMZN hides this cash-cost to shareholders because this economic cost to shareholders does not show up until the employee registers its shares and sells them.  This increases the shares outstanding – or dilutes shareholders.

Employee stock compensation shares are registered and sold every quarter.  The amount per quarter is increasing at an increasing rate because the nominal amount of shares given as part of AMZN’s payroll increases every quarter.  Thus, the amount of shares outstanding at the end of every quarter increases.  This effectively reduces the amount of free cash flow per share that would otherwise be available to shareholders. Therefore the cost of employee stock compensation should be treated as cash cost each quarter and should be netted out from “free cash flow” just like it would be if the employee compensation were paid in cash instead of shares.  

There are several other areas in which Bezos uses creative accounting in order to bamboozle the market.   Unfortunately Wall Street, Capitol Hill and the SEC look the other way.  Wall Street because AMZN is a perpetual source of revenues.  Washingon, DC because Bezos spends millions buying Congressman and because has the use of the Washinton Post as political weapon.

There’s no way to know when the AMZN Ponzi scheme will collapse.  They all do eventually.  But I can say with certainty that, perhaps other than Tesla’s Elon Musk, Bezos is the greatest Ponzi scheme operator in history.

The Pre-Earnings Promote On AMZN Begins

It began last night with FB’s earnings release, which triggered a spike in both FB and AMZN stock after-hours:  LINK.  I have been very clear to the subscribers of my Short Seller’s Journal to avoid shorting AMZN ahead of its earnings release after the market today.  I also advised them to take profits on any short positions or put positions last week.   I have been on the record stating that I fully expect AMZN to report a blow-out quarter.  The trick is to understand how and where they are using GAAP/non-GAAP to inflate the net income and “free cash flow” numbers they will report.    AMZN continues to burn cash and will continue to burn cash.  That’s the bottom line.

Point in case is this puff-piece from Bloomberg News this a.m. which describes how AMZN generates revenues – yet it fails to describe how AMZN turns those sales in real net income and real cash flow.   FYI, AMZN states in the fine-print of its 10K/10Q filings that its reported “free cash flow” number is not a metric that conforms to Generally Accepted Accounting Principles – a fact that should not surprise anyone who does real research and analysis on AMZN.

Amazon (AMZN): Sheer Insanity

Amazon (AMZN) stock is breaking out to a new all-time high today.  The “catalyst” ostensibly was news reports out yesterday that AMZN added 3 million Prime members during the 3rd week of Decemeber (of course, reported by CNBC) – LINK.   The report suggests that AMZN has lifted “veil” on Prime.

But what is not reported in this article,  of course, is the fact that AMZN was offering a free one-month trial of Prime.  Hmmm,  a week before Christmas and I can get free two-day shipping on anything I order?  I’m surprised AMZN didn’t sign up 10 million Prime “members.”  I wonder if CNBC will do a follow-up report next month which discusses the “churn” rate on the 3 million new “members.”  “Churn rate” would be the number of free-trials which cancel after the free month.

CNBC also reported that AMZN had a “record breaking holiday” based on the fact that 200 million more items received free shipping this year, reaching a record number of shipments.  This may be a record in terms of shipments but “free” shipping costs someone money.  I don’t think UPS, Fed Ex and the USPS are shipping AMZN’s products at a loss.  Someone bears this expense.  In my AMZN dot CON report I show in detail how AMZN bears the cost of fulfillment and also does spectacular job of hiding this cost.

The Robo traders grabbed these headlines and started having a big party pushing the stock higher, which is up 32 points, or 4.8%, in less that two trading sessions.

Lost in all this excitement is notion that AMZN is the poster-child representing the fact that the U.S. financial markets are irrevocably broken.  The entire financial system, especially the stock market, has become one big fraud.  It’s reported that Apple’s shipments of the new iPhone from Taiwan manufacturers were cut 5-10%.  This is not happening because demand is strong.   The market doesn’t care, as AAPL is up over 2% today.

At $694/share, Amazon is trading at 988 times its trailing twelve month earnings per share of  70 cents.  This EPS is calculated using AMZN’s version of GAAP accounting.   Think about it this way:   How many of you would buy a business in which you pay $988 for every dollar that business earns?

The Fed likes to refer to a process in which it seeks to “normalize interest rates” – whatever that means.  Let’s assume we “normalize” AMZN’s p/e ratio based on the theory that AMZN can grow into a market p/e of 21 (roughly).   On a trailing twelve month basis, AMZN’s net income was $328 million.  AMZN’s net income margin over the last several years has been 1% or less.  Let’s assume AMZN’s net income margin can “normalize” to Walmart’s 5%.  In order to justify today’s price of $694/share, AMZN’s sales would have grow from $100 billion to well over $300 billion.   How realistic are these assumptions?

If AMZN were to price its products and services based on standard cost accounting methods, it would have to eliminate free shipping and raise the prices on the products it sells.  Many retailers are now matching any price on AMZN.  In this regard, AMZN’s “competitive” advantage is being eroded.  My stock research report shows in detail that AMZN’s reported “free cash flow” is highly misleading.  AMZN burns cash.

Oh but what about AMZN’s now-famously promoted cloud business?  Here’s an email I received from a reader who’s company uses AMZN’s AWS services:

Here’s a funny fact on AWS that again everyone seems to ignore or miss. I have a technology company and our AWS bill is coming up for renewal and the prices have dropped 90%+ in 3 years. And yet, a hyper deflationary commodity, that is being sold in mass quantity to profit-less start-ups, is worth perhaps $150B or more of AMZN’s market cap. Epic.

The point here is that – despite the heavy application of mascara on the wart-hog’s face – the bulk of AMZN’s cloud business is derived from the small tech start-ups being glorified by private equity firms but that will not be around in a few years.  The pricing of cloud computing services has been plummeting.   Sound familiar?  Anyone remember the “fiber optic” bubble that precipitated the internet/tech bubble?  Anyone remember a company called Global Crossing? GBLX filed bankruptcy in 2002.  i’m not suggesting AMZN will go BK, what I am suggesting is that AMZN’s cloud computing business is all hype and hope.  That $150 billion in market cap ascribed to AMZN’s cloud business will evaporate quickly at some point in time.

But here’s the coup de gras:  A friend/colleague who is a Prime member who brags about the fact that AMZN loses money on him forwarded an email to me he received from AMZN. He titled it “AMZN sinks to a new low.”   It turns out he received a “promotional credit” entitling him to a free digital HD copy of “Kung Fu Panda” on Amazon Video.  He has to use this credit by January 15, 2016.  The question is, who the hell wants to watch “Kung Fu Panda” even if it’s free?   Obviously this is a loss-leader marketing ploy designed to get him on to the website where he might pay for something.

The right to distribute this movie was not free for AMZN.  At some point someone along the food chain will have to pay for it.  AMZN pays for it up upfront and then washes the cost of this by capitalizing the expense on its balance sheet.  Eventually this game will come to an end, causing the stock to plummet.  Don’t ask me on the timing of this event.  No one knows.  Bezos doesn’t care because he unloads 100’s of thousands of shares every quarter.

Ultimately the shareholders will pay for this:  the funds who chased the stock price up to the stratosphere and the people who are invested in those funds.  It will not end well…

 

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.

Amazon dot Con Paid For A Monster Of Box Silver Eagles For One Reader

This comment was posted today:

Real life result from Dave’s amazon report. I purchased the report and opened a position in Jan, 16 puts. The market turned against the trade and I added to the position. Monday two weeks ago I covered my trade. With the proceeds I now have a monster box of silver eagles, my investment back, and a new position in amazon puts. Thanks Dave and kistock you should pay attention and learn.  – James

The PPT is starting to lose control of the stock market.   It won’t happen overnight, but at some point the largest hedge fund holders will start unloading the biggest bubble/momentum stocks like AMZN (and AAPL, NFLX and GOOG).   Small fortunes will be made by those who are positioned ahead of the inevitable tidal wave of selling that will hit these stocks.

My AMAZON dot CON report show why Amazon will be hit particularly hard and how to profit from this insight.

 

Is Amazon.com Getting Desperate To Keep Cash Flowing In?

Amazon is desperate – its business strategy is spreading so in the end they will do a lot a businesses but not do them well.  – Observation from a long-time colleague of mine

Amazon announced recently that it is introducing a restaurant delivery service in Seattle. AMZN will deliver food orders from several area restaurants to AMZN customers.  The Company is offering free delivery to Prime members.

I know every city has more one existing company that specializes in restaurant delivery. Denver has at least two big ones and some smaller ones.  I’m sure has Seattle more than one as well.  The service is not cheap and the delivery personnel are well-paid.  This is a cash flow losing proposition for AMZN for as long as it offers free delivery to Prime member.

The catch here is obvious:  AMZN is trying to more Prime members who will pay $99/year upfront to reap the benefits – benefits Amazon admits to losing ten-figures on annually – that’s a couple billion dollars.   There’s also a 30-day free trial, which is great because you take advantage of the freebies – freebies which cost AMZN cash flow – when you know you want to buy a lot of products and then cancel.

“But I Thought Jeff Bezos Says That Amazon Produces Free Cash Flow”

AMZN has now implemented several “gimmicks” in the past year in order to generate cash flow into the Company.  We know that AMZN has raised $9 billion over the last three years by issuing junk bonds.  It has been furiously burning through that cash.   In fact, AMZN raised $6 billion in early December, 2014 and has already burned through $4.3 billion of that through June 30, 2015.

My AMAZON dot CON report shows in excruciating detail how and why this has occurred, despite all of the Company and financial media fanfare touting a highly misleading “free cash flow” number.   AMZN is literally bleeding negative cash flow.

I also show in fine detail – with guidance from a tech industry CPA who was tipped by an insider – how AMZN exploits GAAP accounting rules in order to hide the true cash expense of employment compensation.  This one could ultimately be the trigger that cripples AMZN financially OR cripples existing shareholders with a flood of equity dilution.

Finally, AMZN will be hit the rapid slow-down in consumer spending.   We’re already seeing a general decline in the revenues being generated by most companies in the S&P 500.  Now it looks like consumer spending is going to take a hit.   Per this Zerohedge report, Bank of America is reporting that its internal data, which tracks aggregate spending on credit and debit cards, is showing that consumer spending dropped again in August (what happened to back-to-school spending?).    From Zerohedge:

As BofA notes, “there was broad weakness in retail sales ex-autos and gas spending growth across metropolitan areas, with seven of the ten largest MSAs showing a monthly decline. The biggest monthly decline was in Dallas, followed by Miami and San Francisco. Both Dallas and San Francisco have experienced strong growth over the prior six months, showing a solid recent trend.”

AMZN will not be immune to this broad-based slowdown in consumer spending.  It also appears to be hitting what have been some of the hottest housing markets in the country.

While the path that AMZN’s stock takes in the short is highly unpredictable given that that it’s a big part of hedge fund algos, which follow the momentum being generated everytime the Fed halts trading in order to interfere with impending stock market sell-offs, I can assure you that AMZN is one of the most insanely overvalued stocks in the S&P 500.

My report on AMZN shows in detail why this is the case and why AMZN’s business model will eventually ponzi_schemefail.  It won’t hurt Jeff Bezos at all, because he’s milked the stock market for billions over the years with his Ponzi web of unprofitable businesses masked by highly misleading accounting and, perhaps, an unprecedented level of stock promotion hype from Wall Street drones and mindless financial media talking-heads (“meat with mouths”).

You can click on the link above or the pic to the right for access to my report:

 

AMAZON dot CON: “Black Friday” In July

By way  of background, I was a former financial statement auditor for one of the top accounting firms in the Silicon Valley. I audited many of the high fliers that crashed and burned, took companies public and was at the printers the day the bubble really burst which ultimately tabled that  particular IPO. Then, was a CFO at a software company for a couple years during the really ugly times. My point is I’ve got a heavy tech background.  So, when I say Amazon’s financials are the most misleading and misunderstood I’ve ever seen and their stock will crash mightily, we sound like we’re on the same page.  – comment from a reader who has read my AMAZON dot CON report.

Amazon.com stock is in the midst of an epic parabolic short-squeeze. It’s vertical lift-off is
presumably in advance of its heavily self-promoted “Amazon Prime Day” on July 15. It’s
“exclusive” to Prime members and supposedly will have feature sales prices which are better than “Black Friday.”

“Black Friday” in July? Hmmm…this can only mean one thing: AMZN is desperate to
generate sales in the face of declining retail sales. With Prime membership sales, AMZN
gets to take in $99 cash upfront. This will stimulate sales because Prime members are
entitled to free two-day shipping. But as you know if you read my research report, on a
cost-accounting basis, AMZN loses money on Prime sales once Prime sales per member
reaches a certain level. This is because the cost of two-day shipping – part of AMZN’s
gargantuan cost of fulfillment – eventually exceeds the profits from selling items plus the $99 paid upfront.

With the caveat that the Fed seems to be intent on pushing the entire stock market higher without any regard to the actual underlying fundamentals, I believe that AMZN is a great short-sell opportunity right now, both for a short term swing trade or for longer term large capital gains.

AMZN

To be sure,  if the Fed does manage to move the market up from here, there’s no point in shorting anything.  Fed intervention has forced just about every short-sell oriented hedge fund out of business.  I’ve never seen a market in which almost everyone is standing on the same side of the boat.

Having said that, when the event hits the system that is beyond Fed’s ability to control, the stock Amazon dot Conmarket will crash.  Shorting stocks can yield extraordinary profits in a short period time.  This is especially true with stocks like AMZN where the trend in net income is inversely correlated with the direction of the stock price.  In fact, the day that second break-away gap (right side of the graph above), AMZN reported a large net loss for its first quarter.  Not only that , but its “non-GAAP” phony earnings declined 17% from last year’s phony “non-GAAP” earnings.

In short, this stock is a joke and it’s market cap is absurd.  I’ve updated my AMAZON dot CON report with a brief discussion of why its Prime membership program loses money and will likely always lose money.  Then I discuss trading strategies, including a detailed section on using puts and calls:   AMAZON dot CON

The above report is based on AMZN’s numbers through year-end 2014.  I will be updating the report in the next few weeks with AMZN’s latest numbers.  AMZN is reporting its Q2 on July 23.  Although the updated section will available to current and previous buyers of the report, I will adding some additional analysis based on information I have received which makes the fundamental condition of AMZN even worse than I thought.  I will also be raising the price of the report.