Tag Archives: Jeff Bezos

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 Fake News Witch Hunt: McCarthy’s Red Scare Redux

“Good night and good luck.” – Edward R. Murrow

The Washington Post – I should say, Jeff Bezos’ Washington Post – ran an article last week which featured a report from an organization called “PropOrNot” which claims it used “a combination of manual and automated analysis…in order to identify (“red flag”) [actual quote from the site, verbatim] the following as Russian propaganda outlets.”

Hmmm…”red flag” as in, “Red Scare?”  In what is a bona fide rebirth of McCarthyism, PropOrNot claims to be “an independent team of concerned American citizens with a wide range of backgrounds and expertise” that is currently “volunteering time and skills to identify propaganda – particularly Russian propaganda…”

Seriously, is this some kind of joke?  Is this the same group of “professionals” who devise the “seasonal adjustments” used to brew up Government economic reports?   Has anyone vetted this organization?  Apparently Jeff Bezos is unable to answer any of those questions or, as a responsible purveyor of “independent” journalism he would have dispelled these questions by disclosing the credibility of this group up front.

You’ll note that I specifically single out Jeff Bezos.   Bezos was quietly appointed by the Secretary of Defense to the Defense Innovation Advisory Board in July.    The Board was formed in March 2016 to “focus on new technologies and organizational behavior and culture.”  The Board has been asked to  “identify innovative private-sector practices and technological solutions that the DoD could employ in the future.”

Clearly this is straight out of Orwell’s playbook.  It has behavioral modification and thought control seeping from every pore.  It is a Deep State operation and Jeff Bezos is now part of the Deep State fabric.

This is Orwell’s Thought Police.    The new “advisory board” is headed up by Google’s Eric Schmidt.  Recall that right after the primaries if you typed “Presidential election” in a Google search bar the first item that popped up was picture of Hillary Clinton standing in front of the Presidential seal.   It was eventually removed.

This blog was listed as one of the 200 websites that “reliably echo Russian propaganda.” I’m quite honored to be listed among many of the well-respected sites on “the list.”   Several readers emailed me to say that “you must doing something right” to be included on that ridiculously absurd “Red Scare” list.

The two gentlemen who should be most offended are David Stockman and Dr. Paul Craig Roberts,  both of whom stick out prominently on the list.  Stockman and Dr. Roberts are former high-level Government officials.  Both were, among a long list of prestigious and patriotic accomplishments, members of Reagan’s Cabinet.  The accusation that they are conduits for Russian “fake news” is not only absurdly idiotic, it’s libelous terrorism.

This development is yet another move down that slippery-slope to Totalitarianism on which the United States Government is sliding.  In the 1950’s a Senator named Joseph McCarthy implemented a raging Congressional witch-hunt for “communists.”  The inquisition featured more than a month of televised hearings that began looking for communists in Government.  For over two years McCarthy was allowed to conduct inquisitions which extended beyond Washington DC and which eventually pointed the finger at prominent writers and famous Hollywood personalities.  He singularly destroyed highly successful people in all areas of society.   It was an absolute tragedy and a complete disgrace to this country.

Fortunately, Edward R. Murrow featured a report that undermined McCarthy’s Red Scare witch hunt.  McCarty was eventually censored by the Senate and, even more fortunately, died in 1957.

Unfortunately, American journalism no longer has the likes of an Edward R. Murrow – or even Woodward and Bernstein.  Corporatism and the Deep State has succeeded in eradicating unbiased and truthful mainstream journalism.   The Alternative Media – like the sites featured on the PropOrNot Red Scare list – represent a bona fide attempt to present the truth to the public.

I predict this PropOrNot movement, sponsored by the likes of Jeff Bezos and Eric Schmidt, is going to succeed in shutting down the one ray of hope left for this country.   Jeff Bezos’ Washington Post has taken the lead in this modern version of a McCarthyism “witch hunt” and the WashPo exemplifies the amount of political power and wealth being directed at suffocating the truth.   It is Orwell’s playbook unfolding in front of us.

Good night and good luck.

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.

AMAZON dot CON: Find Out Why The Stock Was Slammed After Q4 Earnings

A reader reports: Hi Dave, I’m in the Amazon puts with 300 strike price that I bought on Jan 17 before they reported earnings. I’ve made $7500 on the trade. Also I read that you think silver is the play of the decade! I’m going to take those profits plus $2500 and buy a box of silver eagles and put the rest of my capital from the put trade back into more AMZN puts!  Thanks!

NOTE:  AMZN has run up over $40 since its post-earnings slam.  Of course Jeff Bezos being the consummate stock market operator announced a $5 billion share buyback. He’s attempting to push the stock back up because he dumps shares every month and, more important, when AMZN drops back to earth (i.e. below $100) he’ll have a cadre of pissed off employees who agreed to take a high percentage of their salary in restricted stock units (RSUs).  At today’s current price, Bezos has paid out close to $500 million worth of RSUs at much higher stock prices.   Imagine thinking you are getting paid $100k but when you go to sell your stock, you find out that your salary during that time period was really $25k…My report explains these RSUs and shows why AMZN is the biggest Ponzi scheme in the modern era…

I’ve updated the AMAZON dot CON report and show what was in the numbers that triggered a $190 sell-off in the stock.  I’ve also updated the section of the report that outlines using calls and puts to short AMZN.

AWS will be one of the first cracks of the glacier but what will bring the whole thing down is when that RSU payment scheme unwinds itself.  Most analysts are overlooking one of the biggest accounting schemes at AMZN in the history of any large public company:  how they pay a good chunk of base salary in RSUs and walking through what that means. That is going to be a day of reckoning for the business school case studies.   – a contact of mine who is a former Silicon Valley insider that specialized in tech company accounting

My report details AMZN’s Restricted Stock Unit accounting scheme and the ramifications for this Ponzi compensation scheme when the stock engages in bona fide price discovery, i.e. tanks hard.  You can access this report here:  AMAZON dot CON

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.

Is AMZN’s Genie Finally Out Of The Bottle?

A curious news report hit the tape yesterday which described a “major shift in [Amazon’s] thinking” – AMZN Buys Rights To “Wiener-Dog.”  I find it curious because,  a) the author of the report clearly has not read my Amazon dot Con stock research report and b) there has not been a “major shift” in AMZN’s “thinking.”  (click to enlarge image)

UntitledThis move by AMZN has been endemic to the way Jeff Bezos operates since he transitioned the Company from a simple-model online book-store into a gigantic Ponzi scheme which has fomented one of the most overvalued high profile stocks in history.  Oh by the way, he’s fleeced shareholders for 10’s of billions of dollars over the last 20 years.

This news report embodies the myth of Amazon.  Every time Bezos rolls out a new add-on to his business model, the AMZN stock bulls herald his genius and the stock goes nuts.  We’ve seen this countless times over the years including recently:  drone delivery, restaurant menu delivery, same-day delivery, cloud computing, content delivery…And yet, curiously, Bezos has never been able to deliver bona fide net income to his shareholders from his add-on Ponzi business ventures.

His true business model is selling dreams to AMZN perma-bull shareholders as a technique to trigger a stampede into the stock.  Heck AMZN stock jumped when Bezos announced hisponzi_scheme personal venture to develop a space travel company.

But perhaps the market is finally catching on.  AMZN stock is down 2.5% today as I write this. I suspect the market may see the through the  transparency of  his latest “major shift in thinking.” He spent a few million dollars of shareholder money on a movie called “Weiner Dog” that was thoroughly panned by critics.   One might think a few million spent is a meaningless amount to a company with at $285 billion market cap.  The problem is that the “money spent” in recent years is being funded with junk bonds.

This is how Bezos has been operating over the last 20 years.  Spending money thrown at him by the stock market into business ventures that lose money and burn cash.  My Amazon dot Con report lays this out in detail.  The truth is that, over the last 20 years, Bezos has become one of the richest men in the world and AMZN stock recently hit a market valuation of $325 billion.  And yet Bezos has only been able to delivery $1.9 billion in net income cumulatively to shareholders over the last 20 years.

Amazon.com: Has The Bubble Finally Popped?

It’s good to no longer be a lone voice in the wilderness.  This latest commentary on the insane overvaluation of Amazon stock comes from Bill Bonner of Agora Research by way of the Acting Man blog:

Every AMZN bear has been made to look like an idiot – but that may soon change. As David Stockman recently pointed out, those who actually take the time to properly analyze its slippery accounting and business model (not the dead fish employed by the sell-side, obviously) cannot help but conclude that it is a giant Ponzi scheme – and the danger that this realization will penetrate the “market mind” is increasing. It remains a “river of no returns” – although consumers have every reason to love it. Investors buying it today pay 830 times net earnings for the stock – and said net earnings actually look somewhat dubious upon closer inspection.

Interestingly, a lot of AMZN critics still insist on describing AMZN as company that generates “cash flow.”  But, as my AMAZON dot CON report details, the metric being describe as “cash flow” comes from Bezos’ own quarterly earnings presentations in which he references “free cash flow.”

For those of us who bother to scour the footnotes of AMZN’s SEC filings, we find that AMZN discloses that its “free cash flow” metric does not conform to GAAP accounting standards. But I take that disclosure in my report and show, with details from AMZN’s financials, why the term “free” in reference to “cash flow” is highly misleading.  In fact, over the last two years the cash used by AMZN to “invest” in its business model has come largely from debt issuance and from gift card and Prime membership deposits.

Amazon Prime?  Bezos admitted about a year ago that Prime loses a couple billion, a fact confirmed by one analyst in July but ignored by everyone:  LINK.  The idea behind Bezos’ strategy is to do whatever it takes to generate sales growth.  The stock price soars when it looks like AMZN is growing rapidly.   However, as my report details with direct evidence from the financials, revenue growth is required in order for AMZN to pay its expenses.  In other words, the only way AMZN stays afloat is if “cash in” exceeds “cash out.”  That’s the definition of a Ponzi scheme.  AND, as a matter of fact, as I show in my report, AMZN has stretched out its accounts payables over the last few years.  This is a trick companies use in order to slow down the rate at which they pay their bills.  If revenues begin to decline, AMZN will hit the wall – quickly.

As I state in the introduction sent to new subscribers of my Short Seller’s Journal, it is impossible to time the top in AMZN.  But once it rolls over, it will drop quickly.   You might miss the move from $600 to $400, you can ride it from $400 to $100 or lower.  AMZN ran from $300 to almost $700 in less than a year.  It can easily complete that roundtrip in even less time.

There’s probably a core level of operations that can be a profitable business. But it is nowhere near the level that generates the current $100 billion of revenue.  AMZN spends at least $1 to generate every $1 of revenue.  That core level of potential profitability would likely imply a fundamental value per share well below $50.

I would not necessarily rush out and short AMZN right now.  It will probably start to move higher into its earnings report on January 28 (after the market close).  I have a feeling that Bezos will pull out all the stops to manufacture an earnings report that beats consensus estimates and the stock will gap up again as all the hedge funds that piled in short this week scramble to cover.  THAT is when you want to start pulling the trigger on shorting the stock.  My AMAZON dot CON report will help you prepare for that.

David Stockman: Amazon And The Fantastic FANGs…

A Bubblicious Breakfast Of Unicorns And Slippery Accounting

Consider the case of Amazon. Its PE multiple on LTM net income of $328 million has dropped from 985X all the way to…….well, 829X! Likewise, it’s now valued at 97X its $2.8 billion of LTM free cash flow compared to 117X at year end.  In the same vein, Facebook’s LTM multiple on net income has dropped from 108X to 96X.

So the reason to revisit the FANGs, and the Amazon bubble in particular, is not because their market caps have come down to earth; it’s because once you get inside, another characteristic of late stage bubbles comes lurking front and center. Namely, the tendency for the accounting income of momo tech stocks at bubble tops to be bloated with non-sustainable revenues and profits from Silicon Valley burn babies…

…I was reminded of this possibility by an excellent post by Dave Kranzler at Investment Research Dynamics. In a piece called “AMAZON dot CON” he took me to task for being too kind to Jeff Bezos’s ponzi accounting.  Among other things, Kranzler went all the way back to the beginning and offered an even more dramatic juxtaposition of the bubble in the stock versus the reality on the ground:

Throughout its 25-year history as a public stock, AMZN has delivered a cumulative total of $1.9 billion in net income to shareholders. Jeff Bezos made $16 billion on AMZN stock in 2014.

You can read the rest of Stockman’s commentary on AMZN here:  Amazon And The Fantastic Fangs

More On The Amazon Spin-Machine

Jeff Bezos’ greatest business trick is his ability to spin the illusion that AMZN is a money-making machine.  In fact, AMZN is remarkable  sales-generating machine,but it costs the Company more than a dollar to generate a dollar of sales.Bezos1

All of a sudden in 2015 AMZN had become a cloud computing services phenomenon.  The last two earnings report showed a rate of growth in its AWS business and the stock rocketed higher.  Of course no one seemed to care that outright the AWS business represents less than 10% of AMZN’s total revenues.  And of course nothing is ever mentioned about the quality of AMZN’s AWS-derived sales.

The truth is, and Bezos never discusses this, that the majority of AMZN’s AWS contract revenue comes from Silicon Valley unicorns.  Most, and maybe all, of them will not be around in a few years.  Here’s an accounting of this from someone besides me:

I would like to introduce a meme before the sell side or buy side catches on.  As you know AMZN was up 100% this year as Bezos revealed the AWS business to the world.  The meme is this: AWS growth is unsustainable.  Not only is it unsustainable I predict that the sell side forward revenue growth rate for AWS will  go to zero or negative by Christmas next year.   It has come to my attention that 50% of AWS growth comes from start ups and my guess is that the majority of those dollars are Unicorns.  AMZN has been an indirect beneficiary of QE largess.  The Fed’s easy money created a bubble in VC funded start ups.  That funding peaked this year and is now in decline as the Unicorn bubble is bursting.  I expect this bubble to unravel fast as we are in the part of the cycle where the capital markets shut down for companies burning cash.  –  AMZN:  The Ghost Of XMAS Yet To Come

My AMAZON dot CON report goes into further detail about the problems with Amazon’s AWS business modelAMZNnew and why, at some point, the market value being assigned to the part of AMZN’s business model will likely largely evaporate this year.