Tag Archives: tech bubble

Gravity Rules: End Of The Bubble Is In Sight

“Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.

The quote above is from Ben Graham, considered to be the father of value investing. Graham followed the crowd in 1929 and lost a small fortune for himself and his investors. Graham collected his learning experience from that disaster and eventually wrote, “The Intelligent Investor,” which is considered to be the one of the best investment books ever written. Warren Buffet enrolled at Columbia to study under Graham. Graham’s teachings formed the foundation of modern money management theories. To this day it is considered the value investor’s “investment bible.”

Wall Street is incentivized to sell the idea that stocks only go up. When I started on the junk bond desk as a salesmen (before switching to trading), I was told my job was to “reach into the portfolio manager’s pocket and take as much money as you can from his pocket and put it into your pocket.”

Wall Street greed has been around as long as stocks have been trading (the NYSE was founded in 1792). But it’s hard to blame stockbrokers for the damaging effects of greed. Stock-peddlers are like well-paid psychologists. They take advantage of human greed. Without investor greed, the stock brokerage business would be considerably smaller than it is today.

A stock bubble can’t exist without investor greed. It starts with greed. It moves into the “bubble” phase when greed is consumed by hysteria. The U.S. stock market has moved into the “hysteria” stage. This would be the point at which the bubble has almost reached maximum inflation. The upward movement in stocks is dominated by a handful of the stocks that, for whatever reason, are moving higher at the fastest rate of levitation. The graphic on the next page shows visually what “bubble to hysteria” looks like.

I reached the conclusion the stock market has moved into the hysteria stage by spending time studying the “Five Horsemen” (AAPL, AMZN, NFLX, FB, MSFT) + TSLA. Even during periods of the trading day when the Dow and SPX are go red, most or all of those six stocks remain green, sometimes moving higher while the broad indices move lower. It’s incredible to watch real-time.

“It’s not to late to catch a ride on the FANG rally” was a headline seen on CNBC last week. This is the type of hysteria that is reflected in the media at bubble peaks.

In the image above (click to enlarge), the graph on the left is the NASDAQ index since the election (from Jesse’s Cafe Americain). The graph on the right is the price-path that occurred during the Dutch Tulip Bulb mania of the 1630’s. You can see that both graphs go vertical. The vertical stage is driven by hysteria in which investors are terrified of missing the next move higher. It also ends with a decline, the rate of which is typically stunning.

The push higher in stocks like AAPL and AMZN is irrational, but TSLA has been infected with outright hysteria.

The worse the news on Tesla gets, the more quickly the stock seems to move up in price. Early in the week last week, Triple-A (the Auto Club group) announced that it was going to raise the its insurance premiums on Tesla cars by as much as 30%. A highway loss data study revealed that Tesla’s vehicles have higher claim numbers and repair costs vs. other vehicles in Tesla’s category. The Tesla S model claims were said to be 46% greater than the average number of claims for similar vehicles. Servicing those claims cost twice as much. The X model car reported a 41% higher crash-rate than similar vehicles and cost 89% more to repair.

In addition, it was reported on Monday that Toyota had unloaded the last of its remaining stake in Tesla before the end of 2016. It marked the end of a collaboration between Tesla and Toyota that began in 2010. Toyota announced that it plans to release its own fleet of long-range mass produced electric vehicles by 2020. Despite this blow of negative news about Tesla, the stock powered up over 8% last week before a late-day sell-off in the 5 Horsemen + Tesla inflicted a $19 reversal in TSLA’s stock price from its high Friday to the close. My puts, the June 30th $317.50-strikes, traded from Friday from a low of $1.06 to close at $2.40 on the bid side.

The graph below shows the price-path of TSLA’s stock since the election. Note that the graph looks very similar to the graphs of the NASDAQ/Tulip Bulb mania. In the 1800’s, writer Charles Mackay wrote a highly acclaimed book called, “Extraordinary Popular Delusions and the Madness of Crowds,” in which he presented his studies on crowd psychology and how it leads to financial manias, among other destructive events. The chart below reflects “crowd” madness as it applies to TSLA stock (the inset price-box from last Thursday morning) – click to enlarge:

While the NASDAQ has appreciated 22% since the election, TSLA’s stock, on deteriorating fundamentals, has shot up 191%. TSLA’s market cap now stands at nearly $61 billion. It burns over $1 billion per year in cash and its financials are riddled with what would have been considered accounting fraud 20 years ago. It sold 72.6 thousand cars in 2016. Compare this to GM, which has a market cap of $51 billion and sold over 3 million cars in 2016, and Ford, which has a market cap of $44 billion and sold 2.5 million cars in 2016.
To say that the action in TSLA’s stock price and its market cap is “insane” does not do justice to the word in “insane.” TSLA is the “poster child” for the mass hysteria that fuels investment bubbles. The problem with shorting TSLA is that the hedge funds are chasing its momentum higher, as investors as investors embrace the negative news events as a reason to pay more for the stock. As such, it’s hard to see a catalyst that will “correct” the price, like with retailers for instance. TSLA, along with AMZN, is one of the rare stocks which will continue levitating until it doesn’t – like a meteor that eventually burns out falls to earth.

In my opinion, the ride down will be worth the pain and blood-loss of sticking with a short bet on TSLA, which is why I continue to buy small quantities of put options that have been expiring worthless. I know at some point I’m going to catch a $100+ reversal in TSLA stock which will more than make-up for the small losses I’m enduring in the puts while I wait for that occurrence. Using puts protects me from the unknown magnitude of upside risk from shorting the stock. Plus, I don’t have make a “stop-loss” decision because I don’t have the theoretic “infinite upside” loss potential that I would face shorting the stock. With my loss capped, I can hang on to the puts through expiration. With a stock like TSLA, often a stop-loss exit is followed up by reversal to the downside, leaving the short-seller without a short position.

As we saw on Friday, TSLA stock can reverse to the downside quite abruptly and sharply. I can guarantee that some number of shorts covered as TSLA was soaring over $370, leaving them with no position when the stock reversed, closing at $357. I don’t want to recommend specific puts to use but I can recommend giving yourself at least four weeks of time. If I were putting on a new put position today, I would probably buy a very small quantity of the July 7th $340-strikes. If TSLA sells back to the $310 area before expiry, which could easily happen as $310 is where the last 2-week push up in price began, the puts would have an intrinsic value of $30. The current cost is about $10.

TSLA reminds me of Commerce One (CMRC), a B2B internet company that went from $10 to $600 in a very short period of time in late 1999 – 2000. It eventually went to $0. I shorted and covered small quantities of stock starting around $450. I was fortunate to have been short from the high $500’s when it finally topped out a $600. The volatility of this stock was extraordinary but persistence and “thick skin” paid off.

The above analysis and commentary is from the latest <ahref=”http://investmentresearchdynamics.com/short-sellers-journal/”>Short Seller’s Journal, in which I present a “Big Short” mortgage derivative stock that will eventually drop close to zero from it’s current price in the mid-teens.  You can find out more here:  Short Seller Journal info.

Microsoft’s Acquisition Of Linked-In Is Beyond Idiotic

I will say right off the bat that Microsoft’s stock is now one of my favorite short-sell candidates.  This is the 2000 tech bubble on steroids.  MSFT itself is extremely overvalued given that its revenues are down over 7% on a trailing twelve month basis compared to its FY 2015 ended June 30th.   Its net income is down 16% on the same comparison basis.   MSFT itself trades at a 38x trailing p/e with declining revenues and income.  It trades at 4.7x sales and 5.4x book value.

It’s been issuing debt like the U.S. Government in order to buy back shares, with its debt load increasing nearly 50%  since September, from $27 billion to over $40 billion.  Since June 2013, MSFT’s debt load is up 333% (from $12 billion).

MSFT’s valuation is in and of itself is insane given it’s debt-addled balance sheet and deteriorating business model.  Microsoft Windows 8 was a total abortion and Windows 10 is not much better.  Anyone with two brain cells to rub together uses the bare bones Windows 7 and the freeware Linux-based Microsoft surrogate software, which can can be downloaded for  free (or a gratis donation) and is superior to MSFT’s crap (see OpenOffice.org, for instance).

Now Microsoft has decided to layer nuclear waste on top of its own toxicity by acquiring Linked-In for over $26 billion.   This is a tragic, if not catastrophic, use of shareholder cash. Here’s LNKD’s net income history:  It reported GAAP net income going from $11.9 million in 2011 to $26.7 million in 2013.  Then it decided to use the Silicon Valley private equity unicorn stock valuation model and spend as much money on “R&D” as possible in order to generate losses.  And it has generated massive losses:  in 2014 it reported a $15.7 million loss. This ballooned to a $164 million loss in its FY 2015.  On a TTM basis, LNKD’s net income has plunged to nearly a $170 million loss.

And MSFT is paying for what?  This is from MSFT’s press release announcing the tragedy:

  • 19 percent growth year over year (YOY) to more than 433 million members worldwide
  • 9 percent growth YOY to more than 105 million unique visiting members per month
  • 49 percent growth YOY to 60 percent mobile usage
  • 34 percent growth YOY to more than 45 billion quarterly member page views
  • 101 percent growth YOY to more than 7 million active job listings   (LINK)

Anyone see ANY mention of those attributes generating any revenue, cash flow or operating income?   Remember when Maria Bartiromo and Joe Kernan used to crow about “clicks and eyeballs” to justify multi-billion market caps for internet businesses with nary a business model?  That’s what this acquisition is all over again.

MSFT on the surface is paying:  5.4x sales, 4x book value, 4.8x enterprise value (market cap + debt) AND 58x enterprise value to EBITDA.    Wait, anyone notice there’s no implied p/e ratio?  That’s because there’s no “e.”  But of course Wall Street has stuck a hockey stick net income forecast for FY 2017, so the implied “forward” p/e is 45x.

Microsoft’s acquisition of LNKD is about as idiotic as it would be to try and convince someone that the sun rises in the west and sets in east.   If anything, this deal is emblematic of an American systemic Ponzi scheme that has gone “off the rails.”

Linked-In is nothing more than a glorified jobs networking bulletin board.  Sure, as the system continues to unravel and more “business services” people lose their jobs, there might be a big jump in “clicks and eyeballs” on Linked-In.  But this will be out of desperation trying to find anyone on the Linked-In board who might offer a ray of hope for employment.  But no one will spend their unemployment check on LNKD’s idiotic premium services.   That will be money much better spent on whiskey and weed, which is exactly what MSFT’s upper management and board of directors must be ingesting to have come up with this idea.   MSFT is my lowest risk short-sell idea of the year.

The best part is that Jim Cramer is pounding the table hard with bullish commentary about this deal.   This makes the idea of shorting MSFT a slam-dunk.  It reminds me of his bullish call on Bear Stearns before Bear collapsed.

If you like this analysis, you might benefit from my Short Seller’s Journal.  Every week is present what I believe to be somewhat unique market insight, a minimum of two short-sell ideas, recommendations for using options and capital/trade management strategies.   My picks greatly outperformed the S&P 500 when the market dropped from early January to mid-February.  You can access the SSJ using this link:   Short Seller’s Journal.

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

AMAZON dot CON

Any question about the role Amazon stock plays in helping the Fed/US Government prop up the S&P 500?Untitled2

The more time I spend researching and observing AMZN, the more I”m convinced that it’s the biggest Ponzi scheme in the history of the stock market.

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. Here’s the details:  Bezos’ Ponzi Scheme

Here’s what’s behind Bezos’ drive to transfer as much money from the stock market to his bank account: Bezos Has Amassed A $59 Billion Fortune – And Wants More. If you read through that article you’ll get a sense of what drives Bezos and how he operates.

Amazon is a Ponzi scheme in the sense that its business model requires sales growth every quarter in order to generate enough cash flowing in to the Company to enable it to pay the cash expenses flowing out of the Company.  This is one of the reasons AMZN is constantly running Prime membership 1st-year fee deals.  It needs the cash it receives upfront in order to help it fund cash payment Untitledexpense obligations.   The graph to the right shows one of AMZN’s basic problems.  AMZN offers free two-day shipping to Prime members.   Its cost of shipping eats up an increasing percentage of its sales revenues.   AMZN hides a lot of its expenses by making liberal use of the increasingly “grey” areas of GAAP accounting rules.  But you would never know this unless you dig deeply into the murky abyss of the footnotes to its financials.

The genius of Bezos is his ability bamboozle big investors and retail chimps into piling into his stock every time he announces another “big” idea.  The current massive bubble embedded in the valuation of AMZN’s stock is the $150 billion of AMZN’s $297 billion attributed to AMZN’s cloud  computing services business, “AWS.”   This is a business that represents about 7% of AMZN’s revenues.    That $150 billion is  21-times AWS’ trailing twelve month revenues and about 150-times  AWS’ trailing twelve month operating income.  Insane valuation multiples.

David Stockman published a piece last week which discusses the degree to which AMZN is an epic stock bubble.  However, even he is bamboozled by AMZN’s numbers. He gives AMZN credit for spending $11.6 billion on R&D.   This is what Bezos wants the market to believe.  Tech companies get a lot of stock market “cred” for showing high R&D “investment.”   But the $11.6 billion AMZN spends is not R&D.   Market professionals like Stockman are getting this “R&D” number from an expense line item in AMZN’s income statement called “Technology and Content.”  They automatically assume that number is R&D’s expense.  But it’s not. I like to dig into the bowels of 10Q and 10K filings and kill the market with truth.   This is from the footnotes to AMZN’s SEC-filed financials:

Costs to operate our AWS segment are primarily classified as “Technology and content.” Technology infrastructure costs consist of servers, networking equipment, and data center related depreciation, rent, utilities, and payroll expenses. These costs are allocated to segments based on usage. During Q3 2015, we expanded our technology infrastructure principally by increasing our capacity for AWS service offerings globally.

What analysts like Stockman assume to be R&D spending are, in truth, mostly the expense of operating AMZN’s website and its AWS business operations.  I detail this in my AMAZON dot CON report. In other words, AMZN is getting $10’s of billions of stock market love based on the idea that it is pouring billions into R&D – R&D that is in reality nothing more than standard operating expenses.

David Stockman and everyone else also use in their analysis the number that AMZN reports as “free cash flow.”  But I show in detail, based on using information that is found by digging through the footnotes in AMZN’s SEC-filed financials and by applying a deep understanding of GAAP accounting, that AMZN’s true cash flow is not even remotely close to the number used and reported by analysts and critics in their reports.  Again, my report is available here:  AMAZON dot CON.

As for the quality of revenues and operating income at AMZN’s cloud business, most of AMZN’s contracts are with Silicon Valley start-ups, most of which will not be around very long.  Moreover, the pricing for cloud computing services has undergone extreme price compression from competitive pressures. Here’s an anecdote from a contact of mine who runs a technology-based healthcare company:

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

Cloud computing services is the contemporary version of fiber-optics.  Remember that business, which drove a large portion of the late 1990’s tech bubble?   Level-Three Communications (Warren Buffet), Qwest (Phil Anschutz), Global Crossing (A JP Morgan sponsored Ponzi business).   The cost of accessing fiber optic networks dropped like a rock as fiber-optic overcapacity and technological advances invaded the business model.  The same dynamic has invaded cloud computing.

Global Crossing went bankrupt and reorganized into Level Three; Qwest renamed CenturyLink is a quasi-utility phone/communications company and survived the fallout from the fiber-optic bubble but its then-CEO, Joe Nacchio, was prosecuted for insider trading and financial fraud and spent six years in prison;  Level Three still operates but it’s stock, on a split-adjusted basis, dropped from a peak of $1,769 on Jan 31, 2000 to a current price of $53.

These examples show the type of hype, fraud and malfeasance which belie extreme financial bubbles.  I am highly confident that the same type of activities are occurring behind the “curtain” at Amazon.

Clearly, from the graph above, the Fed uses AMZN as one of its props to hold up the S&P 500 in order to maintain the illusion that the economy is fine.  But at some point, just like with every bubble stock in history, the gravitational pull of fundamentals will engulf AMZN’s stock price and send it plummeting.  Perhaps this has already begun:

AMZN11

Amazon (AMZN): Sheer Insanity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Amazon.com Is The Corporate Symbol Of Dystopic America

Several readers of my research report sent me an article from the NY Times titled:   Inside Amazon:  Wrestling Big Ideas In A Bruising Workplace.   The article describes a stunning Darwinian corporate culture in which employees must transform themselves into de-humanized Amazonian robots.

The article reads like a chapter from Aldus Huxley’s “Brave New World.  Employees are even encouraged and incentivized to report on each other:

The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)

Without a doubt Jeff Bezos has become a cult of personality who has deluded employees to sacrifice and distort their humanity in order to conform to his empire of deceit, propaganda and fraud.

Lost in the NY Times article is that, despite the mania that has engulfed Amazon’s stock, and despite the vision of a highly motivated and productive workforce, Amazon has failed to generate any meaningful degree of profitability in its 21-year history.   In fact, as my research report shows in detail, Amazon’s GAAP operating margins have declined from over 6% in 2004 to near zero now (6% is standard for big retailers).

The article is worth reading if you think about it in the context of “Brave New World” and Orwell’s “Animal Farm.” But I would also suggest thinking about it – in the context of the facts presented in my AMAZON dot CON research report – the way you would think about Enron or Bernard Madoff.

The stock has been driven up to insanely absurd levels given the fact that Amazon burns cash like a trash incinerator. If you doubt this, then you need to read to my report.  I show how and why Amazon has failed – and will fail going forward – to generate real net income and will continue burning cash.  You can access my report here:   AMAZON dot CON.

My report shows in intricate detail from a technical accounting standpoint, which actual examples that are easy to understand, how Amazon hides its inability to make any money. Although the extreme intervention in the stock market by the Fed/Government makes it extremely challenging to short any stock right now, I believe that the market is starting roll over despite the manipulation.  As this happens, the market itself will lift the “emporer’s robe” on companies like Amazon and a brutal downside reality to the stock will commence.

Any professional money manager who owns a big position in AMZN with other people’s money is breaching their fiduciary duty if they don’t read my report and consider the facts presented.

From a reader of my report:

I audited many of the high fliers that crashed and burned, took companies public & was at the printers the day the bubble really burst which ultimately tabled that 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

Is Amazon Done? “Regression To The Mean” Could Cut AMZN In Half

Fantastic write-up! I was a former financial statement auditor for a big accounting firm in the Silicon Valley during the tech bubble. I audited many of the high fliers that crashed and burned, took companies public & was at the printers the day the bubble really burst.  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.  – Former tech company CPA who follows my work

Click here to access this report:  AMAZON dot Con

A reader of my report sent me the following Fibonacci analysis of AMZN’s stock, which has clearly gone parabolic on bubble helium:

AMZN_Fib1 (Click to enlarge)

AMZN’s move in price is in no possible way supported by the underlying business and financial fundamentals. Contrary to Wall Street pimp reports and manipulated AMZN earnings presentations, AMZN is highly cash flow negative and will continue to be for the foreseeable future.

When the rug is finally pulled out from under Amazon, it will be revealed for what it really is:   an online version of a big box retailer, only this “online” version has the worst operating margins in the industry and burns cash like a Fukushima nuclear inferno.

My report shows in fine detail how AMZN promotes its financial performance in a highly misleading way – bordering on fraudulent.  I explain why AMZN’s business model burns cash and continues to lose money even on a GAAP-manipulated net income/loss basis.  I also offer capital management advice and put/call strategies, with specific examples.

You can access this report here:   AMAZON dot CON

After reading your commentary about Amazon on 7/24 I immediately bought two Jan 16 put options and also purchased your report. To say your report was an eye opener is an understatement. You clearly show that Amazon’s financial structure is a house of cards. Later on 7/30 I added a third put option. As of Friday 8/7 I am up 29% on the position. All I can say is thank you for all that you do!  – “Bill” in North Carolina

AMZN: The World’s Greatest Ponzi Show – Find Out Why

Dave  was brilliant in his 25 page Amazon.dot.con report detailing the financial manipulation at the hand of Jeff Bezos. His investigative mind and tenacity in digging further for the truth has exposed Amazon’s/Jeff Bezos’ fraudulent activities to the public. Dave has a unique way of explaining every aspect of each graph, photo and financial statement throughout his report that anyone without the experience in the field can comprehend.  – “Kim” in Connecticut

AMAZON dot CON – the price is going up after tomorrow.

The Wall Street Journal in an article on AMZN’s “transparency” reports that, “In the case of Amazon, the company finally broke out details showing that its AWS business is now generating about $6 billion a year in revenue with operating margins of 21%—far above the 5% margin seen in its North American retail business.

Yet AWS is still projected to account for less than 10% of Amazon’s total revenue this year and next. Amazon, meanwhile, now trades at more than 150 times forward earnings.   Here’s the link:  WSJ

Of course, I would never expect a financial media journalist to understand accounting and finance.  Why should they?  Their job is to regurgitate the pig vomit served up to them by the Wall Street firms that buy expensive advertising in their publications.

AMZN in fact revealed very little about its AWS “cloud computing” business other than showing us revenues and a rigged operating income number.  My research report explains why the operating income number attributed to AWS is not only highly misleading but the source of revenues fueling the growth of AWS is of very low quality.   And AWS is A LOT less than 10% of AMZN’s total revenues.

Furthermore, that “150 times forward earnings” number is a complete fabrication of Wall Street hockey puck projections.  AMZN has lost money on a net income basis in two of the last three years and, nothwithstanding the temporary boost to operating income from AWS, will continue to absolutely bleed cash.   It’s burned through $4 billion in cash in just the first six months of 2015.

My report goes into a level of in-depth analysis that will never be published by Wall Street or the financial media.  You can access my report here:    AMAZON dot CON

The price of this report is going up after tomorrow.

AMZN

 

AMAZON dot CON: Updated And Upgraded Research Report

Testimonial:   After reading your commentary about Amazon on 7/24 I immediately bought two Jan 16 put options and also purchased your report.   To say your report  was an eye opener is an understatement.   You clearly show that Amazon’s financial structure is a house of cards.  Later on 7/30 I added a third put option.   As of Friday 8/7 I am up 29% on the position.   All I can say is thank you for all that you do!

I have updated my AMAZON dot CON research report to reflect the Company’s latest quarterly financial report, released on July 23.  I show in detail why the headline hype was empty propaganda.

I also upgraded the report based on some information I received from a well-seasoned technology industry accountant.   One particular piece of information came from someone he knows who works at the Company.  It’s an aspect to AMZN’s reporting that is hidden in the financials and no one has ever written about it.

Finally, I show why this stock on a fundamental basis is a failing business model as its being operated now and is worth well less than $100/share.

You can access the report here:  AMAZON dot CON

If you have previously purchased this report, please contact me at InvestmentResearchDynamics@gmail.com  and I will send you a copy of the updated report.  I am making this report available at the current price until Friday.  After Friday I will be raising the price of this report – it’s that good.

AMZN_PIC

Business Insider Publishes Disinformational Amazon.com Pump Piece

Here’s why:  Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

Please recall from late 1999 – 2000, Henry Blodget (founder of Business Insider), was pumping AMZN harder than Morgan Stanley’s Mary Meeker.  Blodget led his sheep right into the slaughterhouse.

If Jillian D’Onfro, the Business Insider author of a wildly inaccurate piece of Amazon.com marketing propaganda, had bothered reading my AMAZON.CON research report she would have avoided embarrassing herself.

The subject of her article was Amazon’s Fulfillment By Amazon business, which lets third-party sellers use Amazon’s warehouse and fulfillment infrastructure to store and ship goods – Article Link.

As show in my report, Amazon generates its sales by subsidizing total the cost of getting a product from the shelves to an customer’s living room.  This is one of the primary reasons that AMZN has been bleeding cash for the past several years.

Ms. D’Onfro ignorantly reports that third-party sellers love using AMZN’s FBA infrastructure.  Of course they do!  It helps generate profitable sales for these sellers because they can ship a product to the end-user at a shipping rate that is being subsidized by AMZN (really, by the idiots who doled out $9 billion for AMZN’s two recent junk bond deals).

AMZN benefits on the top line because it gets a commission from 3rd party sales, which has been a significant contributor to AMZN’s revenue growth.  Although it’s difficult to prove without looking at AMZN’s inside books, I would bet that AMZN loses a small amount of money on 3rd party sales after netting out the cost-accounting expenses that would be attributable to this revenue segment.

But, of course, the stock market could care less because it chases AMZN’s stock higher based on revenue growth, not profitability – the latter of which AMZN has lacked at a growing rate over the last two years.

The second source of intentional disinformation is her assertion that AMZN’s Prime membership growth rate benefits from 3rd party seller product offerings.  Sure, it might help stimulate sales of Prime memberships, but AMZN loses a 3-commas x 2 per year on Prime…that’s $2,000,000 – by the Company’s own admission.

Of course Prime members spend more than double what non-members spend on AMZN.  This is because for $99 Prime members get unlimited free 2-day shipping and unlimited access to digital content at no charge.  It’s no-brainer if you do engage in a lot online consumerism.

But, as I show in detail in my AmazonDotCon research report, the Prime membership fees are an important source of upfront funding for AMZN.  The problem is that, on the back end, AMZN bleeds cash from its Prime business.

I was a bit stunned at the poor reporting done by Ms. D’Onfro.  But after reading the disclosure at the end of her article about Bezos being an investor in Business Insider, it all made sense.  I guess Henry Blodget will continue skimming a lot of money as AMZN’s primary snake-oil salesman until AMZN hits the wall.

Reader comment:  Recalling the 2000 tech wreck, Amazon and its ilk, something akin to JOJO the Dog Faced Stock Puppet, were leading the crash downwards.  Amazon is the poster child for this tech bubble, again. Maybe Bezos and Musk should cash in some hyperinflated shares of stock and buy an island somewhere, preferably one with a non-extradition treaty.  Here is a perfect example of ZIRP gone wild.