Tag Archives: Amazon

A Stock Market Crash: A Matter Of “When,” Not “If”

Given group-think and the determination of policy makers to do ‘whatever it takes’ to prevent the next market ‘crash,’ we think that the low-volatility levitation magic act of stocks and bonds will exist until the disenchanting moment when it does not. And then all hell will break loose, a lamentable scenario that will nevertheless present opportunities that are likely to be both extraordinary and ephemeral.  –  Highly regarded hedge fund manager, Paul Singer, in his latest investor newsletter

Singer has apparently has unloaded $5 billion worth of stock, which is 15% of his funds management.

Anyone happen to notice that several market commentators have argued that Bitcoin is  a bubble but the same stock “experts” look the other way as the U.S. stock market becomes more overvalued by the day vs. the deteriorating underlying fundamentals? Bitcoin going “parabolic” triggers alarm bells but it’s okay if the stock price of AMZN is hurtling toward parity with the price of one ounce of gold. Tesla burns a billion per year in cash. It sold 76,000 cars last year vs. 10 million worldwide for General Motors. Yet Tesla’s market cap is $51.7 billion vs. $48.8 billion for GM.

This insanity is the surest sign that the stock market bubble is getting ready to pop. If you read between the lines of the the comments from certain Wall Street analysts, the only justification for current valuations is “Central Bank liquidity” and “Fed support of asset values.” This is the most dangerous stage of a market top because it draws in retail “mom & pop” investors who can’t stop themselves from missing out on the next “sure thing.” There will be millions of people who are permanently damaged financially when the Fed loses control of this market. Or, as legendary “vulture” investor Asher Edelman stated on CNBC, “I don’t want to be in the market because I don’t know when the plug is going to be pulled.”

A friend/colleague of mine is a point and figure chart aficionado. He sent me an email on Thursday in which he said even with the five horsemen (FANGs + AAPL) and the SPX and Dow up today (and the SPX setting a new all-time high), the bullish percent index (BPI) of the NYSE is negative which means there are more stocks generating a point and figure sell signal than a buy signal. This has been fairly consistent over the past couple of weeks. (Note: the bullish percent index is a breadth indicator based on the number of stocks on point & figure buy signals). When the BPI is negative over an extended period of time, it reflects the fact that a lot more stocks in the NYSE are trending lower than are trending higher. When a declining number of stocks are participating in the move higher of a stock index, it is a bearish signal.

As my friend says, “in reality this will continue until it doesn’t.” He goes on to say: ” what this shows me is that at this time it’s much better to be strategically short than broadly short. This will change too at some point…”

Picking out strategic shorts has been the focus of the Short Seller’s Journal. Not all of the ideas have worked and a couple back-fired – in defiance of the company’s underlying fundamentals – but many ideas are well below the price at which they were presented either the first time or presented again thereafter. One idea that has declined 39% (declined $42) since August 2016 is Ralph Lauren, which was presented on August 14, 2016 at $108.19. It closed Friday at $66.11, down 41 cents on a day when the SPX hit another all-time high. RL has closed lower on 12 of the last 13 days.

One subscriber emailed me earlier this week to let me know he had shorted 200 shares at $108 and covered 100 of it this week. He’s hanging on to the other 100 share short. I mentioned to him that my 12-18 month target was $50 and that he should hold the other 100 short at least until August because it’s only going to get worse for the consumer and retailers.

Currently there’s a a large percentage of stocks trading below their 50 and 200 day moving averages.  Many stocks are close or at 52-week lows.  Some stocks, like Sears Holdings (SHLD) are no-brainer shorts.  Sears is going to file for bankruptcy – it’s down 32% from April 2nd, when it was presented as a short idea in the Short Seller’s Journal.  Similar to the probability of a stock market crash, it’s  a matter of “when,” not “if.”

Stocks Down Because Of Trump? Plus Target’s Earnings Trick

The by-line on Fox Business this a.m. was that stocks were down because of “DC grid-lock.” Is this some kind of joke? How about stocks are down because they are more overvalued than at anytime in history by every single financial metric except the highly manipulated GAAP accounting net income calculations.

Speaking of which, the entire financial reporting apparatus has become one of the biggest jokes – if not an outright fraud – in financial markets history (with all due respect to the Ponzi scheme’s currently in operation at Amazon and Tesla). Target’s earnings report this morning is the perfect example.

Target’s stock “pop” was being attributed by the cable tv financial “reporters” to the fact Target’s sales and earnings per share “beat” Wall Street estimates. That’s not hard to do because the highly exalted “beat” is a rigged game played by company management and Wall Street, as management slowly “guides” Wall Street’s penguins into a series of reduced “estimates” leading up to the earnings release. By the time the results are reported, the earnings bar is low enough for a paraplegic to “jump” over.

The financial tv sock-puppets were reporting that Target’s sales had increased. Well, maybe vs. “guidance” but unfortunately none of these faux-reporters bothered to look at Target’s actual earnings report. There we find that Target’s sales declined year over year by 1.1%.  Gross profit dropped 2.5%, which means Target likely engaged in predatory price-cutting to stimulate its online sales vs. Amazon.

Targets earnings before interest and taxes – its EBIT – plunged 10.2%.   Provision for taxes increased quarter over quarter by $74 million, or 26%.  So how did Target “beat” earnings?

Target’s “interest expense” using GAAP accounting manipulation declined by $271 million, or 65%.   This is despite the fact that TGT’s debt level increased by $55 million year over year for Q1. What gives?  Anyone who bothered to read TGT’s earnings release after seeing the headline report, likely nobody except me, would find this disclosure:

The Company’s first quarter 2017 net interest expense was $144 million, compared with $415 million last year. This decrease was driven almost entirely by a $261 million charge related to the early retirement of debt in first quarter 2016.

Target refinanced debt in Q1 2016 and paid a premium to the par (book) value of the debt. This was added in to Target’s interest expense in Q1 2016. It was a one-time charge that could have just as easily been stripped away and disclosed as a “non-recurring loss” in order to keep the income statements comparable for comparison purposes. Adding the $261 million non-operating GAAP charge back into the Q1 2016 EBIT boosts TGT’s earnings before taxes that quarter to $1.158 billion. In Q1 2017 TGT’s earnings before taxes was $1.034 billion. As you can see, TGT’s “apples to apples” earnings before taxes declined by $124 million. From there Targets net income and earnings per share on the true “adjusted-GAAP” basis would show a decline, not a gain.

This type of earnings gamesmanship that goes on between corporate America, Wall Street and the zombified sock-puppet financial “reporters” is endemic to the giant U.S. Ponzi Scheme.  Using earnings “sleight of hand” and allowable GAAP accounting earnings management gimmicks, Target was able to transform deteriorating revenues and economic profitability into something that is being touted in the fast-food financial reporting machinery as “an earnings POP.”   Bad news was converted into good news and Target’s stock jumped 4.4% at the open today despite a 1.1% drop in the S&P 500.

This is the type of financial analysis that you will find in the Short Seller’s Journal and it’s why subscribers were able ride Sears (SHLD) from $11.92 to $7.89 in 5 weeks and KATE from $23.67 to $17 in 8 weeks.  You can find out more about this unique subscription service here:   Short Seller’s Journal.

You can’t throw darts at the market and win every time just yet. At some point everything will no doubt head south, but for now its great having your analysis to pick the ones with best chance. In all honesty mate, the recommendation I am most looking forward to in the SSJ and the MSJ is what bar we all meet at in a couple of years time for some celebratory brewskis. – subscriber “James” from the UK

Is The U.S Ponzi Scheme About To End?

“How did you go bankrupt?” “Two ways. Gradually, then suddenly.”
– Ernest Hemingway, “The Sun Also Rises”

I was chatting with a friend two days ago who was agitated by the insanity of the markets. Look at TSLA, for instance.   This thing loses $13,000 for every car sold.  Soon the tax credits – i.e. the taxpayer subsidies – will expire and TSLA will lose even more per car because it will have to lower the price to entice buyers.   Its balance sheet is a ticking time bomb in the form of residual value guarantees issued by TSLA used to induce buyers into paying up for a car that has depreciated in value considerably more than the value of the guarantee. Those poor saps don’t realize it yet, but they will be unsecured creditors to a bankrupt corpse of a company.  And yet, the market has pushed the market cap above the market caps of GM and Ford.

To say this is absurd is an insult to the word “absurd.”  I’m still trying to decide whether TSLA or AMZN is the biggest Ponzi scheme in U.S. history.  I have not had a chance to dissect TSLA’s financials and operations to the extent that I have done so with AMZN.  With AMZN the market doesn’t seem to care that, on a net income basis, in its latest quarter AMZN’s product sales business (it’s non-cloud, or AWS, business) lost money (that’s right, if you subract the operating income of AWS from total net income,  AMZN lost money – AMZN manufactures net income for its non-AWS business via GAAP gimmicks) .  But why focus on the facts?  The operating income of its AWS cloud business dropped 29%.   Once GOOG, MSFT and ORCL have fully implemented their attack on AMZN’s cloud market share, AWS will become irrelevant.   I would bet every single entity that bought AMZN stock since it released its Q1 earnings does not know these facts.  AMZN, pure and simple, is a Ponzi scheme.

Amusingly, there’s a contest on CNBC over whether AMZN or GOOG hits $1000 first.  This is the surest signal that the end of this fiat currency-driven credit and stock bubble globally is about to collapse.

Given the inability to manipulate its market via paper derivative instruments and short selling, this is the message that Bitcoin is signaling:

In the absence of the ability to manipulate the market, this is the same message that gold and silver would be sending to the world, only the scramble for gold and silver bullion in any form would be more frenzied and it would be widespread. There actually is a somewhat frenzied scramble for gold and silver in eastern hemisphere markets based on the premiums to melt being paid for refined products in places like India, China, Turkey and Viet Nam.

At some point the western Central Banks will lose the ability to manipulate the gold and silver price and the Comex will default.  That’s when chaos will break out in the physical gold and silver markets.  That may be what it will take to trigger the collapse of the U.S. Ponzi scheme.   Apparently JP Morgan understands this inevitability.  Prior to 2011, JPM did not operate a Comex vault.  It had zero Comex silver.   Currently JPM is holding nearly 108 million ozs of silver, or 54% of the total silver reportedly held in Comex silver vaults.   This tells us, or at least me, that smart insider money is loading up on precious metals – not Bitcoin – and that silver is a better bet than gold.

Hemingway’s “slowly” method of going bankrupt has nearly run its course.  There’s no way to tell the timing on the “all at once” side of this trade but the price action in Bitcoin is signaling to the world that the obviously inevitable draws near.


If this is the case, the true reality beneath Bezo’s fraudulent accounting had to have been horrific:

Amazon’s quarterly profit misses estimates, shares tumble

From Reuters – LINK:  

Amazon.com Inc reported a lower-than-expected quarterly profit on Thursday as expenses rose and the company provided a disappointing fourth-quarter revenue forecast.

The growth of AMZN’s cloud business is rapidly slowing down.  This has been one of my key arguments about the insanity of the market cap attributed to AMZN’s cloud business. It’s tiny compared to AMZN’s overall revenues.  And competition in the cloud space is going to become ferocious as Microsoft, Google and Oracle begin to really flex their muscles.

The only question left for me is to determine which between AMZN and TSLA is biggest Ponzi scheme in history.  AMZN is maybe a $10 stock and TSLA is likely worth $2.

If The Fed So Much As Blinks, The Stock Market Will Collapse

Although the stock market has had several “shock and awe” straight up rallies this year, since the beginning of January the graph of the S&P 500 looks like the infamous “bridge to nowhere:”    (click to enlarge)


Up until January, the S&P 500 had risen at a near-continuous 45-degree angle, punctuated with an occasional and very brief 1% sell-off. Every time the stock market attempted to correct, the Fed either rolled out another new QE program in some form or used its regional emissaries to soothe the computer algos and retail investor cattle with sweet nothings designed to jawbone the stock market higher. As you can see from the graph above, the one sell-off prior to this past summer was halted a by a Fed puppet’s call for more QE.

The big plunge that occurred in August was triggered by economic fears and the plunging price of oil, capped by concern about the Fed raising interest rates by one-quarter of one percent.  And of course the Fed rolled out its emissaries to soothe the market and a decision to defer the one-quarter of one percent rate hike.   What does it tell us that  minuscule rate hike threat that looms like a nuclear bomb over the markets?…

The truth is, the markets are so disconnected from the underlying fundamentals that if the Fed were to pause for just a brief moment from its continuous market intervention, the stock market – along with the entire financial system – would collapse.

As you can see from the graph above, while the Fed – for now – has the ability to prevent the S&P 500 from a big sell-off, it’s been unable to push the S&P beyond the upper end of the sideways channel framed in red in the graph above.    And now we find out that the club of inside-connected, highly regarded large hedge fund managers have been unloading their stock holdings into every rally – LINK.

Currently the S&P 500 is being propped up with five stocks – AMZN, GOOG, FB, MSFT and GE.  Collectively these five stocks account for than 100% of the YTD return on S&P 500.  I can’t speak knowledgeably to four of them, but you can find why AMZN is the largest public stock Ponzi scheme in the history of the U.S. stock market in this report:   AMAZON dot CON.    I have an interesting paired traded strategy that I’m working that reduces the risk/volatility of shorting AMZN outright and it will be made available to anyone who purchases the AMZN dot Con report.

Beneath the veneer of those five stocks, there’s a bona fide bear market  going on in many sectors and individual stocks.  We saw this most recently with several retail stocks which went into cliff-dive mode after releasing quarterly earnings.  Some sectors of the market are down 20-50% this year.

Currently just about every possible economic indicator is telling us the economy in the U.S. is starting to collapse.  This is one variable over which the manipulators have no control. The price of oil is about to drop into the $30’s and the price of copper is likely going to go below $2 soon.  By all indicators, retail sales for the holiday season are setting up to be a disaster.  The big retailers know this which is why “Black Friday” sales promotions have already started.

The housing and auto markets are next.  The Fed and Government have once again over-stimulated demand for housing and new cars with subprime lending programs.  Demand has been “pulled forward” and sales in both markets are rolling over.

I don’t know how much longer the Fed can hold up the stock market.  At some point the gravitational force of the collapsing fundamentals will outweigh the Fed’s ability to keep a safety net under the stock market and a lid on the price of gold.  I predict it will get a point in which you won’t be able to get out of the stock market (extended market holiday) and you will have trouble finding physical gold/silver to purchase except in the private market at exceptionally high premiums to the quoted spot price.

The Economy Is Already In A Recession – Holiday Spending Will Be Dismal

The contraction is accelerating and crosses economic lines and industry lines. In fact, one can say 95% of the economy is driven by the consumer. For instance,  Cummins engine is not a consumer stock but if consumer cannot spend the trucking industry dies. – my colleague, Hal

The Government/Fed can print money to keep the banks from collapsing and to keep the financial system “solvent,” but it can’t print economic activity.  To be sure, opening up the easy credit spigot to car buyers caused a temporary bounce in auto sales.  But this is not sustainable.  At a certain point, the availability of car buyers who can support a monthly car loan payment gets exhausted.  Over 30% of all new cars sold to the private sector are now financed with sub-prime and deep sub-prime loans.  Car repo rates are going through the roof according to my sources in the industry.  Recently a high percentage of car sales were “fleet” sales to the Government.

The truth is, nearly all “organic” economic indicators are showing that the U.S. economy is in a recession.  At some point the narrative that entire world is in a nasty recession except the U.S. economy is going to prove to be a fairytale.  The continued collapse in copper and oil prices reflects this.

Most of the major privately-compiled economic series have been declining down to their 2008/2009 levels and heading lower.  Just this morning, for instance, the industrial production report showed an unexpected .2% drop for October.  The Wall Street brain trust was looking for a .1% gain.

I wrote an article for Seeking Alpha in which I discuss three major indicators which show that the U.S. economy is already in a recession similar to the one that hit in 2008/2009:  The Economy May Already Be In A Recession:  Short Retailers.

Last week the stocks of Macy’s, Nordstrom and Advance Auto Parts all took nasty cliff-dives after their earnings reports.  The results and the accompanying management commentary indicated that retail demand hit a wall in August and the outlook is dismal.  Yesterday it was Dillard’s turn to take a digger, as it missed earnings and revenue bogeys already set very low by Wall Street:


From the time Macy’s reported on Friday thru yesterday, after Dillards reported, Dillards stock had shed over 14% of its market value.  This tells two things:  1) market expectations built into stock valuations are way too high and 2) the economy is in trouble/retail sales over the holidays will highly disappoint.

The best way to play this is with Amazon.com.  This stock is by far the most over-valued stock in the S&P 500 on a P/E basis.  The hype, hope and manipulation built into AMZN’s stock is at levels not seen since the tech bubble.  The Company is already quietly offering Prime members a $5 “gift card” if they just download the Amazon phone app and log in. It’s just another form of a “pre-Black Friday” sales promotion.

As my report shows, on a true accounting basis, AMZN is still generating negative free cash flow and is using every accounting gimmick under the sun to cover this up.  My latest AMZN report has updated options and capital/risk management ideas.  You can access the report here:   AMAZON dot CON.

Amazon stock has gone parabolic.  It’s one of the most irrationally priced stocks I have ever observed in over 30 years of participating in the financial markets.  There is a lot of money to be made on the downside and my report shows how and why.

AMZN Is The Stock Market Bubble Poster Child

Don’t take it from me, this is a comment that was emailed to me this weekend:

Druckenmiller thinks AMZN can raise prices anytime it wants. But its entire business model is based on price as a competitive advantage. The service is quick delivery, easy order. Well most of hte big companies have easy order on the web.  Also easy delivery if you are willing to pay for it. So what’s the competitive advantage? AMZN has just about everything?

I use Amazon less now that they have to charge sales tax of 7% where I am and 10% in Chicago/Cook County. As we have discussed Amazon is losing that advantage.

I think there is a big issue of just what is Amazons competitive advantage? If it’s price–they have to attack a litany of companies, all with bigger and better balance sheets. That war could take a number of years. When do shareholders of AMZN wake up and see AMZN is not making money while Walmart is making money and pays a 3.3% dividend to boot?

This is what the stock chart looks like of a company that is in extreme bubble mode.  Go back and lookUntitled at the stock charts of every single tech stock at the peak of the internet/tech bubble.   Need I remind anyone that the NASDAQ plunged over 90% when that bubble popped?

AMZN is going to go out of business, but its stock price has disconnected completely from the reality of its underlying business model.  Stanley Druckenmiller erroneously and foolishly added rocket fuel to the stock move with assertions that were 100% incorrect.  My updated report stock report goes over this in detail.   AMAZON dot CON.

Click on the image to access this report.  I am going to raise the price again after AMZN reports Q4 and its 2015 full year at the end of January.

From my update and full reports:   As we’ll see, it’s apparent that Druckenmiller had not done any of his own research on the Company. He was likely belching out the smoke some Wall Street salesman blew up his ass. He for sure did not dissect Amazon’s financial statements filed with SEC.


The U.S. Is A Complete Financial And Political Fraud

Perhaps most emblematic of this complete fraud and corruption that has engulfed our system is the spectacle of Hillary Clinton’s candidacy for President.  She is clearly the front-running candidate for the Democrats and likely would win a head-to-head against any of the Republicans.   How is this sanely possible?

Anyone who bothered to pick up a newspaper just a few times per year since 1991, when Bill was first running for President, knows that Hillary is probably the most corrupt attorney and politician in the history of the country.  Whitewater and her “successful” foray in cattle futures (anyone remember those?) don’t even garner scrutiny anymore because her list of dirty laundry is so long and filthy.   Needless to say, Hillary Clinton should be in front of a firing squad – not in front of Congress justifying her role in Benghazi and the likely next President of the U.S.

Anyone who supports her candidacy is either woefully ignorant, mildly retrarded or insanely naive.

Amazon.com:   I just did quick glance at AMZN’s latest earnings report.  The stock is up 10% to an all-time high on what is exceptionally misleading “headline” earnings numbers.  Yes, it “beat” its EPS and revenue “bogeys” but the entire stock market seems to be giving Amazon a mulligan on the truth.

One again the Company’s business operations failed to generate cash flow.  Directly from its 10-Q’s state of cash flows, the only reason AMZN’s operations produced a positive cash inflow is due to the fact that the Company significantly stretched out its payables – this is despite the fact that its receivables declined – and the Company took in $1.7 billion in Prime and gift card deposits.  We know Bezos ran two separate heavy Prime promotions during Q3, including one that incorporated a big discount to the “membership” fee.  AMZN has admitted that it loses at least $2 billion per year on Prime.

Furthermore, included in AMZN’s numbers is only about half of the amount that it pays out stock-based salary compensation.   I discuss this aspect in-depth in my report.  If AMZN were forced to expense up front for GAAP purposes the entire cost of its stock-based salary payments, it would wipe out completely AMZN’s reported operating income of $409 million and turn the GAAP-based “good” news into a loss.

Amazon’s stock “aura” is the stock market equivalent of Hillary Clinton’s Presidency:   Complete unfettered fraud and deception.  By the way, insiders took advantage of the price of the stock and literally dumped shares during Q3, mostly during August.

The September existing home sales report:   I’ll have more to say on this soon, but the National Association of Realtors statistical Houdini’s managed to convert a steep 6% “unadjusted” drop in monthly home sales from August to September into a “magical” seasonally adjusted 5% annualized rate increase.

On average and in general, this is almost impossible because going back to 2005, existing home sales have declined from August to September every single year except 2013.   The NAR refuses to disclose its seasonal adjustment calculations as I have emailed them several times asking for clarification.   It can therefore only be considered a completely corrupted metric.

The stock market appears to headed for all-time highs again, this is despite that the fact that just about every single non-Government produced macro economic indicator which shows that the economy is already in a recession.   The Government debt limit is about to be raised close to $20 trillion.  Based on Gallup surveys,  the average consumer has a negative outlook for the economy and plans on reducing their monthly household discretionary spending.

McDonald’s stock has bounced 17% since September 1st, despite the fact that its revenues are in terminal decline and the franchisees have expressed a gloomy prediction for the fast food chain’s future:   LINK.    The Company reported a “beat” of the expected earnings but this was achieved through stock buybacks  and a 42-cent charge for tax reserves taken in Q3 2014, both factors of which presented the illusion that MCD had earnings growth this quarter.   But its revenues, like every other big American company, are declining.   Without the GAAP gimmicks, MCD’s EPS would have dropped 15%.  Yet, the stock is at an all-time high.

The U.S. financial system is the biggest, most fraudulent Ponzi scheme in history.  When you peel back the layers of lies, deception and fraud, the U.S. is a crumbling empire.   Go back and rewatch some of the footage of Hillary Clinton’s facial expressions while she’s being “grilled” by Congress.   It’s hard for me to even look at the modern Madusa’s face without turning away – all I can see are venous snakes coming out of her skull in place of what should be hair.  Hillary Clinton is pure evil incarnate.

For me Hillary Clinton represents just how far down the road to doom the United States has traveled.

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.


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.

Smart Money Is Selling…

…Goldman, Citi, Deutsche Bank (Zerohedge.com).    And then there’s this from Mark Faber, in response to a lead-in statement from Erin Ade of RT that the S&P 500 p/e trades at 17.6x trailing earnings:

“(deep laughter) I have to laugh. Who knows what the earnings are. They’re like the statistics published by the U.S. Government. They’re probably all doctored. So maybe on a normalized basis the S&P 500 p/e is maybe much higher. All I know, and this is a relatively valuable measure of valuation, the price to sales ratio of the S&P 500 IS at the highest level ever.  And sales are less doctored than earnings.”

You can listen to the rest of the interview with Faber here:   U.S. Stocks To Correct 50%.

As Faber points out, the income statement line item below the revenue line at every public company in America is manipulated.  Some, like Amazon.com (AMZN) and the homebuilders,  are manipulated much more than most others.  The SEC lets Tesla get away with manipulating its revenue numbers, which is beyond criminal.

My research reports on the homebuilders and on Amazon.con go into explicit detail which shows how these companies are manipulating their numbers in order to present highly misleading operating and net income numbers.  As an expert in GAAP accounting, if these companies were forced to re-state their earnings using the GAAP accounting standards in place in 1980, they would all be reporting huge losses, especially Amazon.

As an example, AMZN trades at 2x sales.  Retailers historically and currently trade well below 1x sales.   For instance, Walmart trades at .6x sales and Target at .7x sales.  And that’s in an insanely overvalued stock market.  But it gets better.   WMT trades at 7.9x operating income and TGT at 6.8x operating incomes.   BUT Amazon.con trades at 977,528x its 2014 operating income!

My research report on AMZN shows in documented detail why AMZN does not deserve a huge valuation premium to companies like WMT and TGT.  In fact, because AMZN’s operating income has been declining every since 2004, as I show in my report, it can be argued that AMZN should trade at a discount to the WMT/TGT multiples.

Read my report and find out why AMZN is insanely overvalued:   AMAZON.CON  (reader testimonial:  “By the way Dave your ideas regarding Amazon.con were the best I’ve ever heard!  When it finally turns around and crashes it will be something for the history books!)

I include a section that discusses using options to short the stock and to help manage the volatility risk of a highly manipulated market.  And believe me, if big hedge fund managers like David Tepper are dumping stocks, I can guarantee you that most smart money hedge funds are dumping  AMZN into every rally that has volume, as AMZN is one of the largest holdings in the hedge fund world.