Tag Archives: AMZN

Netflix And Amazon: Case Studies In Accounting Games

Over the time since I started the Short Seller’s Journal, several subscribers have asked about Netflix (NFLX). For some reason I have refrained from presenting it as a short idea, instead choosing AMZN and TSLA as my insanely overvalued “tech poison” short-sell ideas. However, knowing that NFLX was reporting this week, I decided what if – and really more like when – it spiked up on a headline “beat,” I would take a close look at the numbers to see what’s going on with NFLX accounting. Sifting through NFLX’s web of accounting chicanery took a lot longer than I anticipated…

As I expected, I found a company that pushes the envelope in an area of GAAP accounting in which there is substantial “grey” area that enables companies like NFLX to manufacture and manage reported GAAP net income. But NFLX bleeds cash, as I’ll show. The quote at the top summarizes the NFLX business model: it will burn cash “for many years.”

In a sense, NFLX is similar to a Ponzi scheme. As long as cash received in the form of revenues and stock or bond financing exceeds cash expense outflows each year, it can continue operating. But as soon as revenues decline or the capital markets refuse to give NFLX money, it will collapse. As you will see below, while NFLX is generating growth in its net income, the amount of cash burned by its operations has been increasing dramatically. And it has been financing this cash flow deficit with debt.

The above narrative is from last week’s Short Seller’s Journal. I walked through the areas in which NFLX exploits grey areas in GAAP accounting rules to manipulate the cash flows from its business model (cash revenues minus actual cash expenses) in order present GAAP net income. The primary lever it uses is the guidelines (note: “guidelines” – not “rules”) for depreciating media capex. I show step-by-step how NFLX exploited the grey areas in GAAP to manufacture the $0.15 earnings per share it reported.

I also discussed strategies for shorting NFLX, which included shorting the stock outright and using puts. Subscribers who shorted NFLX on Monday morning this past week are green on their short positions. I also suggested capital management strategies.

This week I will be showing how to dissect the numbers AMZN must disclose in the footnotes to its 10-Q filing to see what’s really going on beneath the Jeff Bezos show. For instance Bezos opens his earnings presentation every quarter with a slide and a discussion of the “Free Cash Flow” produced my AMZN on an LTM basis. It’s the very first slide in the earnings call slide show. He’s now claiming LTM FCF of $9.7 billion.

BUT in the footnotes to the 10-Q – a place where no Wall Street analyst ever dares to venture, assuming they even know the footnotes exist – there’s a disclosure that explains that Jeff Bezos FCF is not GAAP FCF. Using GAAP, the Bezos FCF is reduced to $4.1 billion. I’m using ETIDA minus Capex minus Capital Lease Amortization payments. I even give him the benefit of adding back the non-cash share compensation portion of salary, which technically is not allowed in GAAP because share dilution is a form of cash use ultimately from the shareholders perspective. The $4.1 billion is GAAP free cash flow, not the Bezos bullshit FCF.

And not only that, but the AMZN core business model is starting to break down. But that analysis will be saved for this week’s Short Seller’s Journal.   Subscribers to the SSJ also get 50% off a subscription to the Mining Stock Journal.   Click here to learn more about the SSJ:   Short Seller’s Journal info.

Dave, just a moment for some feed back. I just placed and order for 1 oz gold eagles thanks to my profits off Tesla and BBBY. Thanks, as always. – Subscriber email received in early July

Amazon Prime Day! What Does This Mean?

Amazon stock is up $6 in pre-market trading because it’s…”Prime Day!”  But what does this really mean?  It means AMZN will burn more cash selling and fulfilling commodity products with free 2-day shipping. But it will likely get another $20 pop in its stock because “Prime Day” revenues today will grow X% over 2016’s “Prime Day.”

Am I the only person in the world who has figured out that AMZN’s e-commerce operating income margin is nearly zero?  Does anyone besides me know that AMZN’s non-North American e-commerce business loses money on an operating basis?  The numbers are posted in its 10-Q every quarter.   North America and ROW combined last quarter AMZN’s e-commerce business did a whopping 0.3% operating margin.  At least that’s 0.3 higher than Blutarsky’s grade point average in “Animal House.”  Short Seller’s Journal subscribers know this because I show them the numbers –  Wall Street’s institutional investor clients do not know this because these market “professionals” can’t be bothered with doing actual research).

AMZN has already been crowned as the new “grocery killer” by the Jim Cramers of the world.  It’s amazing that he can make this assertion without having ever looked at AMZN’s real numbers.  In fitting irony, the opposite of Cramer’s assertion is the truth based on real world numbers.  Walmart, Target, Bed Bath etc have 3-5% operating margins that they can “play” with to attack AMZN’s e-commerce model.

Is AMZN “killing” brick-n-mortar or are the healthy brick-n-mortars going after AMZN’s e-commerce business?

Go onto Walmart’s website.  It’s now offering 2-day free shipping on millions of SKU’s without any requirement to pay money up front to join a “club.”  I was wondering by Bezos decided to offer low-income people a big discount on Prime memberships.  He knew Walmart was going to offer 2-day free shipping to that retail demographic without a “club membership” requirement.  Guess what Jeff?  WMT can afford to ship for free.  Your company cannot.  It doesn’t cost much extra for WMT to offer 2-day shipping because it can fulfill most orders from store inventory in the same county or city or neighborhood from which the order was placed.  AMZN can not do that.

Walmart is more than 3x the size of AMZN and it is many times more profitable.  BBBY’s e-commerce business last quarter grew 20% year over year.   I got news for  Cramer and all the robotic Wall St. analysts, and the lemmings who slavishly worship both:   Walmart, Best Buy,  BBBY and TGT have room to subsidize sales even more and still operate profitably.  AMZN does not.  If you don’t believe me then look at the SEC-filed number yourself.

Stay tuned…there’s more…two major category-killer discount grocery chains from Europe are expanding aggressively in the United States and Microsoft is cutting back on certain of its operations to focus on its cloud enterprise business.  AMZN’s AWS business will be attacked aggressively by MSFT, ORCL, GOOG and IBM.  The price of cloud computing will eventually approach zero.  Did anyone out there realize that AMZN’s cloud margins decline every quarter?

Happy Amazon Prime Day!  AMZN will lose money on just about every item sold today.  I guess that’s a great reason to celebrate…

The Biggest Stock Bubble In U.S. History

Please note, many will argue that the p/e ratio on the S&P 500 was higher in 1999 than it is now. However, there’s two problems with the comparison. First, when there is no “e,” price does not matter. Many of the tech stocks in the SPX in 1999 did not have any earnings and never had a chance to produce earnings because many of them went out of business. However – and I’ve been saying this for quite some time and I’m finally seeing a few others make the same assertion – if you adjust the current earnings of the companies in SPX using the GAAP accounting standards in force in 1999, the current earnings in aggregate would likely be cut at least in half. And thus, the current p/e ratio expressed in 1999 earnings terms likely would be at least as high as the p/e ratio in 1999, if not higher. (Changes to GAAP have made it easier for companies to create non-cash earnings, reclassify and capitalize expenses, stretch out depreciation and pension funding costs, etc).

We talk about the tech bubble that fomented in the late 1990’s that resulted in an 85% (roughly) decline on the NASDAQ. Currently the five highest valued stocks by market cap are tech stocks: AAPL, GOOG, MSFT, AMZN and FB. Combined, these five stocks make-up nearly 10% of the total value of the entire stock market.

Money from the public poured into ETFs at record pace in February. The majority of it into S&P 500 ETFs which then have to put that money proportionately by market value into each of the S&P 500 stocks.   Thus when cash pours into SPX funds like this, a large rise in the the top five stocks by market cap listed above becomes a self-fulfilling prophecy. The price rise in these stocks has nothing remotely to do with fundamentals. Take Microsoft, for example (MSFT). Last Friday the pom-poms were waving on Fox Business because MSFT hit an all-time high. This is in spite of the fact that MSFT’s revenues dropped 8.8% from 2015 to 2016 and its gross margin plunged 13.2%. So much for fundamentals.

In addition to the onslaught of retail cash moving blindly into stocks, margin debt on the NYSE hit an all-time high in February. Both the cash flow and margin debt statistics are flashing a big red warning signal, as this only occurs when the public becomes blind to risk and and bet that stocks can only go up. As I’ve said before, this is by far the most dangerous stock market in my professional lifetime (32 years, not including my high years spent reading my father’s Wall Street Journal everyday and playing penny stocks).

Perhaps the loudest bell ringing and signaling a top is the market’s valuation of Tesla.  On Monday the market cap of Tesla ($49 billion) surpassed Ford’s market cap  ($45 billion) despite the fact that Tesla deliver 79 thousand cars in 2016 while Ford delivered 2.6 million.    “Electric Jeff” (as a good friend of mine calls Elon Musk, in reference to Jeff Bezos) was on Twitter Monday taunting short sellers.  At best his behavior can be called “gauche.”   Musk, similar to Bezos, is a masterful stock operator.   Jordan Belfort (the “Wolf of Wall Street”) was a small-time dime store thief compared to Musk and Bezos.

Tesla has never made money and never will make money.  Next to Amazon, it’s the biggest Ponzi scheme in U.S. history.  Without the massive tax credits given to the first 200,000 buyers of Tesla vehicles,  the Company would likely be out of business by now.

Once again the public has been seduced into throwing money blindly at anything that moves in the stock market, chasing dreams of risk-free wealth.  99% of them will never take money off the table and will lose everything when this bubble bursts.  And only the biggest stock bubble in history is capable of enabling operators like Musk and Bezos to reap extraordinary wealth at the expense of the public.   The bell is ringing, perhaps Musk unwittingly rang it on Monday with hubris.  The only question that remains pertains to timing…

If you are looking for ideas to take advantage of the inevitable stock market implosion, try out my Short Seller’s Journal.  It’s a weekly subscription newsletter delivered PDF form via email that drills down into the latest economic data and presents short-sell and put option ideas.  You can find out more and subscribe using this link:  Short Seller’s Journal information.

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.CON – ROFLMAO

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.

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:

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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.

World’s Most Speculative Mania?

The western media – especially any mainstream U.S. news source – has made it a habit to blame the world’s problems on Russia and China.   The U.S. economy is aces – when the U.S. stock market drops it’s China’s fault.

Bloomberg published a report yesterday which presented China’s commodities futures market as the world’s most speculative mania:

What started as a logical bet — that China’s economic stimulus and industrial reforms would lead to shortages of construction materials — quickly morphed into a full-blown commodities frenzy with little bearing on reality.  Bloomberg News

But let’s put China’s commodities trading frenzy in the context of the stock that I estimate is the biggest corporate Ponzi scheme in U.S. history:

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AMZN trades at a trailing GAAP p/e of 562x.  I use the term “GAAP” here quite loosely because there’s GAAP and then there’s Jeff Bezos GAAP.  It trades at 23x book value, 30x tangible book value and 40x EBITDA.    Bezos claims that AMZN threw off  a couple billion in “free cash flow” for Q1.  Yet, if this is a provable fact, how come AMZN’s cash balance declined $3.4 billion from the the end of Q4 2015 to the end of Q1 2016?   Someone is not telling the truth…

It did not hit me until this morning (this was well before the Zerohedge article reporting a similar concept later in the day) that the reason the SEC and Congress do not open an investigation into Amazon’s accounting is because Jeff Bezos owns the Washington Post. That’s a very powerful weapon to dangle in front of a Washington, DC politician or bureaucrat.

AMZN stock hit an all-time high today because some chode from a Wall Street bucket shop issued a “buy” with a price target of $1,000.  The analyst did not have any specific fundamental reasons for why the stock was worth $1,000/share.  But then again, I’ve never seen anyone besides this blog and a few others attempt to hold these Wall Street hand-puppets to any reasonable degree of accountability.

The Bloomberg article references the the Dutch Tulip bulb mania of the 1600’s and the internet bubble of the late 1990’s in the U.S. when referencing the frenzied activity in the Chinese futures markets.   How convenient for Bloomberg to overlook that the fact that the greatest investor fraud of all-time is domiciled right here in America.

Yes, I suppose just like Bloomberg’s assertion that Chinese commodities futures “started off as a logical bet,” at time in its infancy as an online book reseller Amazon’s stock was a logical bet.   But fueled by Fed money-printing, regulator-enabled fraudulent accounting and extreme investor greed, Amazon stock is the embodiment of a financial system that is completely corrupted to the core.

The Latest Short Seller’s Journal: The Greater Fraud Contest

The stock I feature in the latest issue of the Short Seller’s Journal was down 3.5% today. The company’s revenues are highly correlated with the GDP,  which is going negative rather quickly.  This stock easily has another $20 of downside by the middle of the summer, which would be another 33% from here.

Icahn has always been one of the shrewdest investors out there. I doubt he’s betting on anything less than a 35-50%% decline. The SPX could drop 50% tomorrow and still be overvalued. Based on historic GAAP accounting and historical valuation metrics, the S&P 500 is intrinsically worth 500-800.

I am working to determine whether TSLA or AMZN is the biggest stock fraud in the history of our markets. Both companies aggressively implement the same business model: charge the end-user (buyer) a price below the all-in cost of getting the product from the factory floor to the customer’s possession for the sake of generating revenues.

AMZN stock has run up $72 to $673 (Friday’s close) since its earnings were reported last Thursday. The Company continued with the same highly misleading accounting in Q1 2016 and the misleading presentation of its numbers that I layout in Amazon.con.  AMZN burned through OVER $3 billion in cash during Q1 2016 despite making the claim that it generated $5 billion of free cash flow.

Of all propaganda-promoting publications, the Wall Street Journal featured a story last week which outlined the ways in which Elon Musk (TSLA founder) moves around cash among TSLA, Space-X and Solar City, depending on which entity recently raised money and which entity needs money. Pure Ponzi scheme.

TSLA is now down over 6% from when I originally recommended shorting it on March 27, despite the fact that SPX is slightly higher. I reiterated the recommendation in last week’s Short Seller’s Journal issue – it’s down 17% since then.

The S&P 500 is getting ready to roll over again and edge off the cliff.  It’s not a question of “IF” but a matter of “WHEN.”  In the latest Short Seller’s Journal I present three great short ideas, including a not well known company who’s revenues are highly tied to GDP activity. This stock could easily shed $30 over the next 3-6 months.  Subscribers to the SSJ gain access to the Mining Stock Journal for half-price (and vice-versa).  You can access the SSJ by clicking here:  Short Seller’s Journal.

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Jim Cramer Needs To Be Shut Down And Investigated For Illegal Stock Promotion

“No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”  –  Jim Cramer on CNBC’s “Mad Money” on March 11, 2008.

Three days later, on March 14, Bear Stearns stock plunged 92% after it was taken “under” by JP Morgan.

Today Cramer has made the claim on CNBC that “a lot of the bear markets have ended since February 10.”  According to Cramer, apparel, restaurants, iron ore and machinery groups are now in bull markets.  “C’mon in retail  stock trading minnows, the water is nice and warm.”

This assertion is just ludicrous.  For starters, we know from hard industry data released a little over a week ago – LINK – that the service sector – i.e. restaurants and retail-oriented businesses – are now shedding employees.  If a new bull market in consumption were born, service businesses that rely on middle class disposable income expenditures would be hiring, not firing.

Clearly Cramer completely neglects the fiduciary duty to conduct appropriate due diligence before issuing investment advice.   Because if he actually rolled up his sleave and did some work, he would have found the middle class is sinking in a sea of debt.  Sorry Jim, imminent personal bankruptcy is not conducive to disposable income-based consumption.

Currently a proposed rule issued by the Department of Labor would raise the bar on the investment advisory industry’s standards of fiduciary duty. “Fiduciary duty” is a legal duty to act solely in another parties’ interests.  Naturally Congress, funded by CNBC and Suze Orman, Inc are working overtime to oppose this rule.

Using the Bear Stearns case as an example, Cramer was advising his viewers to hold their Bear Stearns stock.  But was he acting in the viewers’ interests?   More likely, Cramer’s hedge fund cronies were busy unloading their positions in Bear Stearns as quickly as possible before that Titanic hit the iceberg.

I did an analysis of Bear Stearns in January 2008 and concluded that Bear was technically insolvent.  I shorted the stock in the low $80’s and managed to cover in the $30’s.  Cramer is a complete idiot if he truly thought Bear Stearns was a viable going concern.  In the absence of a willingness to believe that Cramer is a moron given his educational background,  the obvious conclusion is that Cramer is exceedingly corrupt.

What will it take for the Justice Department to investigate Cramer and all of his off-CNBC dealings?  My colleagues and I have known for well over a decade that Cramer is little more than a front for the hedge fund community.  Cramer is the Wall Street version of Hillary Clinton.  He’s gotten away with committing egregious crimes for so long that he likely  is unable to differentiate between legal and illegal.  Rule of Law, what’s that?   Cramer should not be on CNBC issuing pump and dump recommendations, many of which end up badly impaling retail stock investors.  Instead, Cramer should be busy defending himself from a bona fide SEC/Dept of Justice inquiry into his operations.

Cramer also pumped up the infamous “FANGS”  today.  He singled out AMZN just because Piper Jaffray and Wells Fargo both said AMZN was “doing much better than people think?” Based on what, Jim?   “Fiduciary duty” is not defined as parroting comments issued by retail brokerage firms who’s business is predicated on selling overvalued stocks to retail pigeons.

AMZN stock has been up as much as $9 today because of Cramer’s pump and dump call plus the fact that AMZN debuted its online streaming fashion show to promote its new clothing line.  Hey there’s an original idea, use the broadcast media to stage a mock fashion show in order to sell clothing.  Why didn’t QVC and Home Shopping Network think of that?

If AMZN’s clothing line business is like nearly every other business line of AMZN’s, it will sell it’s clothing for less than the cost of producing and delivering the product to the end-user.  QVC trades at a 13 p/e.  If AMZN does not make money on its clothing business, at what multiple of zero should AMZN’s clothing business be worth?  Currently AMZN’s $9 Cramer spike has melted into a loss of 23 cents.  Did you get some of your buddies out on that, Jim?

For original analysis and long term and short term short-sell trading ideas, check out the Short Seller’s Journal.  Last week several subscribers made between 50-200% on a “quick hit” short sell trade idea on Big Five (BGFV) that I emailed out them on Monday mid-day. (click on image to subscribe)Untitled

 

The Writing Is On The Wall: Latest Issue Of Short Seller’s Journal Is Up

It’s been estimated that at least a third of the 175 oil producing companies in the U.S. are at risk of slipping into bankruptcy this year. At some point banks are going to have to start foreclosing on defaulted loans and many companies will be forced to liquidate. Shell Oil announced this past week that it is exiting its North American shale operations. The writing is on the wall. This is going to inflict a significant amount of damage to the U.S. economy – an amount of damage that is not yet being anticipated by investors or by the policymakers.  – the February 28th issue the Short Seller’s Journal

This week I feature a two stocks that can treated either as a “quick hit” or positioned as a long term short. I’m also going to include a highly undervalued silver mining stock as a “contra” stock market idea. For new subscribers, because the precious metals sector tends to move inversely to the stock market, going long mining shares is similar to shorting stocks.

I also review some strategies for using puts to either speculate on a big move lower or replicating a longer term short position in AMZN – see AMAZON dOT CON.

You can subscribe by clicking on this link – SHORT SELLER’S JOURNAL – or on the image below.  Subsribers to SSJ will be able to subscribe to the Mining Stock Journal for half-price.  The debut issue should be out this upcoming week or the following week at the latest.

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