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.