Investment Research Products

Powered by Kranzler Research

Articles

The Collateral Grab Begins As Tesla Burns Through Cash

Tesla bank creditors have forced the Company to add its Fremont manufacturing factory to the pool of assets which secure Tesla’s $1.8 billion credit facility. The cover story is that the banks “suggested” that Tesla add the additional collateral to support the asset base underlying the bank. However, that’s unmitigated propaganda.

Banks have access to the inside books at companies to which they lend. In this regard, bank creditors have valuable insight to the actual cash flows in and out of a borrower. Anyone who has dabbled professionally in the world of credit, especially junk credit, will recognize this as the beginning of the end for Tesla. This is a move by the bank lenders to grab title to Tesla’s most valuable assets. Soon there will be a scramble to tie anything not already pledged.

The junk bond investors are totally screwed now. Not that we have any idea of the true “next best use” of Tesla’s primary assets. But by the time the liquidation of Tesla begins there will be a flood of EV’s on the market which means there will likely not be much demand from a company looking to use Tesla’s manufacturing facilities to produce even more EVs. In fact, its seems at this point that Tesla’s production process has major flaws, which means the facilities require a large infusion of capital to bring Tesla’s facility up to an acceptable standard of production quality. They may choose to bring in process engineering expertise or new technology and software from ICE Process Management to bring their facilities up to standard.

Perhaps the next best use in a place like Fremont is to convert the manufacturing facility into a homeless shelter. But that won’t help the banks.

This is to say that, intrinsically, the junk bonds are worth zero. The assets are tied by the banks and likely worth less than that the value of the debt that sits above the junk bonds in the pecking order. The bondholders have no prayer of ever receiving their principal back from cash flow. This means that the stock is intrinsically worth zero as well.

I guess the irony in this situation is that Deutsche Bank, of all banks, is the lead creditor. Talk about letting the inmates run the asylum…this also means, of course, that $10’s of billions in credit default swaps are likely connected to the credit facility as well as the junk bonds. As is, Deutsche Bank is radioactive. Add Tesla to that mix and the recipe for financial nuclear explosion has been created.

Homebuilder Stocks Are In A “Bear Market”

I strongly believe that labeling the condition of the stock market based on arbitrary “percentage changes” up or down is absurd.  But then again most attributes of the current stock market are sublimely ridiculous, if not outright Orwellian.

But, what the heck. If down 20% is how you want to define a “bear market,” then a portfolio of Lennar (LEN, down 24%), Beazer (BZH, down 24%) and KB Homes (KBH, down 22%) are in definitive bear markets and heading lower, as are several other homebuilder stocks. This is a fact that intentionally goes unreported by Wall Street and Wall Street’s hand-puppet, the mainstream financial media (CNBC, Fox Biz, Bloomberg, Wall St Journal, Marketwatch, etc).

Homebuilders maliciously exploit a GAAP loophole that enables them to remove “interest expense” from the SEC-filed income statement. This artificially boosts reported GAAP and non-GAAP net income/earnings per share. I review this using Beazer as an example in the last issue of the Short Seller’s Journal.

The nature of the “bull market” in housing is widely misunderstood. As such, the easiest area of the market to make money shorting stocks is the homebuilding sector. I can say with certainty that 80% of the money I’m making shorting stocks is with homebuilder puts. It’s a boring sector but the percentages moves in these stocks makes it easy to “scalp” profits and to set-up low risk, highly profitable long term short positions.

 

Right now homebuilders are behaving like an ATM machine for short-sellers.

The Short Seller’s Journal is a unique weekly newsletter that provides truth-seeking insight on the economy and presents ideas for making money shorting stocks (including put option and capital management strategies). Learn how to use the homebuilders as your own ATM here: Short Seller’s Journal.

A Quiet Bull Market Move In The Mining Stocks

This analysis is an excerpt from the opening market commentary in my April 19th issue of the Mining Stock Journal.

I was looking at some charts with a colleague two weeks ago and was startled to discover that a very quiet bull move has begun in the miners. Like the move that began in late 2015, it seems that some of the junior miners per GDXJ have gotten the party going. As you can see in the chart above, GDXJ is up 12.8% since December 7, 2017. GDX is up 9.5% since March 1st. Some individual stocks are up quite a bit more than the indices: AEM up 18% since March 1st, EXK up 49.7% since Feb 9th, Bonterra up 25% since March 1st, etc.

The chart below is two weeks old but the bull pattern in GDX (and GDXJ, HUI, etc) has continued after a brief pullback (which in and of itself is bullish):

In my opinion, the charts in the sector are beginning to look quite bullish. I would like to see the Comex gold futures open interest drop 70-80k contracts – it was 499k as of Friday’s close. However, if a bigger move than has occurred already starts now, the big Comex banks will be forced to cover their large short position in gold futures. This will “turbo-charge” the move [in fact, per the latest COT report, the Comex banks continue to cover shorts and reduce their net short position and the hedge funds continue to dump longs and add to shorts – historically this shift in trader positioning has preceded big bull moves in gold/silver].

Silver is also starting to form a very bullish base:

Wholesale silver eagle premiums are creeping higher, as are retail premiums. Perhaps the big inventory overhang that had formed over the last year is starting to clear out. Also, silver mining stocks, especially the ones that actually produce and sell silver, have been quietly outperforming just about every stock sector (I have had a buy recommendation on a smaller silver producer since early October 2017 – the stock is up 20% since that buy recommendation (I own it) and it’s up 47% since it bottomed in December.

From a fundamental standpoint, given the deteriorating financial condition of the U.S. Government and the escalating rate of inflation and geopolitical risks, the planets are aligned for a big move in the precious metals sector.   If the banks continue to reduce their net short position in Comex paper gold – and concomitantly the hedge funds continue to reduce their net long position – then both the planets and the stars will be aligned for a move in the sector that I believe will take a lot of market observers and participants by surprise.

The Mining Stock Journal is a bi-weekly (twice per month) newsletter that offers in-depth precious metals market commentary and, primarily, junior mining stock ideas.  My goal is to find the hidden “gems’ ahead of herd.  You can find out more here:  Mining Stock Journal information.

Wow great report…by the way I have cancelled most of my precious metal subscriptions except your’s…. You do a treat job for us! – from “Robert,” received last week

Are The Precious Metals Percolating For A Big Move?

Since the beginning of 2018, gold has been stuck in a trading range between $1310 and $1360.  Silver has ranged between $16.20 and $17.50, though primarily between $16.80 and $16.25 since February.   So what’s next?   While most analysts base their views largely on chart technicals, I have found – at least for me – the Commitment of Trader “tea leaves” is a more reliable forecasting tool.  Friday’s COT report showed a continuation of the trader positioning pattern that I believe will support the next big move higher.

Elijah Johnson and James Anderson invited me on to their weekly Metals and Markets podcast to discuss why I believe the metals may be bottoming.  In addition, we discuss the why Amazon.com and Tesla are horrifically overvalued:

**********************

CLICK ON IMAGE TO LEARN MORE ABOUT EACH NEWSLETTER:

 

Amazon And Tesla Reflect Deep Fraud Throughout The Financial System

Not much needs to be said about Tesla.  Elon Musk’s performance on the Company’s conference call speaks for itself.  He basically told the lemming analysts who have been the Company’s Wall Street carnival barkers to go have sex with themselves in response to questions looking for highly relevant details on Model 3 sales projections and Capex spending requirements.

I believe Musk is mentally unstable if not mildly insane.  He would do the world a favor if he gathered up what’s left of his wealth and disappeared into the sunset.  When Tesla collapses, I hope analysts like Morgan Stanley’s Andrew Jonas are taken to court by class-action hungry lawyers.  My response to something like that would be justified schadenfreude.

Amazon is similar story on a grander scale of accounting fraud and fantasy promotion. AMZN reported its Q1 numbers Thursday after the close. It “smashed” the consensus earnings estimate by a couple dollars, reporting a questionable $3.27 per share. I’m convinced that Jeff Bezos is nothing more than an ingenious scam-artist of savant proportions, as this is the second quarter in a row in which AMZN reported over $3/share when the Street was looking for mid-$1 per share earnings.

I bring this to your attention because there’s something highly suspicious about the way Bezos is managing the forecasts he gives to Street analysts. Every company under the sun in this country typically “guides” analysts to within a few pennies, nickels or dimes of the actual EPS that will be presented. For the Street to miss this badly on estimates for AMZN two quarters in a row tells me that Bezos is intentionally misleading the analyst community, which typically hounds a company up until the day before earnings are released. Food for thought there.

I don’t want to spend the time dissecting AMZN’s numbers this quarter in the way I have in
past issues. This is because the earnings manipulation formula remains constant. One interesting detail that Wall St. will ignore is the fact that AMZN’s cost of fulfillment as a percentage of product sales increased to 24.6% vs 19.7% in Q1 2017. It cost 25 cents per dollar of e-commerce revenue vs 20 cents per dollar of revenue a year ago to deliver an item from the warehouse shelf to the buyer’s door-step. Apparently all of the money Bezos spends on fulfillment centers ($2.3 billion in Q1) is not reducing the cost of delivery as promised.

The financial media flooded the airwaves with hype when Bezos announced that AMZN Prime had 100 million subscribers. However, the fact that the cost of fulfillment increased 500 basis points as percent of revenue generated tells us that AMZN is losing even more on an operating business on Prime memberships. I love ordering $10 items that are delivered in 2-days because I know that AMZN loses money on that transaction.

For “product sales” in aggregate (e-commerce + Whole Foods + the portfolio of crappy little service businesses) the operating margin increased to 1.16% of sales vs. 0.3% of sales in Q1 2017. HOWEVER, in acquiring Whole Foods, AMZN folded a 5% operating margin business into its revenue stream. It should have been expected that AMZN’s operating margin would increase this year. I’m surprised that folding in a 5% business did not boost AMZN’s operating margin even more. See the cost of fulfillment. In effect, Bezos used positive cash flow from WFM to subsidize the growing cost of Prime fulfillment. I also suspect that Bezos will be running WFM’s margins into the ground in an effort to boost revenues. The prices of WFM’s house-label brands were slashed immediately. AMZN’s stock is driven off of revenue growth and Bezos does not care if that means sacrificing profitability.

What’s mind-blowing is that big investors have let him get away with this business model for nearly two decades.  If the Fed and the Government had not printed trillions starting in 2008, Amazon’s grand experiment would have expired.  More than any company or business on earth, Amazon is emblematic of a fiat currency system that has gone off the rails combined with Government-enabled fraud of historic proportions.

So far, AMZN has not segmented the revenues from the WFM business in its footnotes. I doubt this will occur despite the fact that it would help stock analysts understand AMZN’s business model. Again, the conclusion to be made is that Bezos will push WFM’s operating margins toward zero, which is consistent with the e-commerce model. Hiding WFM’s numbers by folding them into “product sales” will enable Bezos to promote the idea that Whole Foods is value-added to AMZN’s “profitability.” In truth, I believe WFM was acquired for its cash – $4.4 billion at the time of the acquisition – and for the ability to hide the declining e-commerce margins for a year or two.

In terms of GAAP free cash flow, AMZN burned $4.2 billion in cash in Q1 compared to $3.6
billion in Q1 2017. Again, this metric helps to prove my point that Bezos sacrifices cash flow in order to generate sales growth. Not only does AMZN now have $24.2 billion in long term debt on its balance sheet, it has $22.2 billion in “other liabilities.” This account is predominantly long-term capital and finance lease obligations. This is a deceptive form of debt financing, as these leases behave exactly like debt in every respect except name. One of the reasons AMZN will present “Free Cash Flow” at the beginning of its earnings slide show every quarter is because it excludes the repayment of these leases from the Bezos FCF metric. However, I noticed that AMZN now sticks a half-page explanation in its SEC financial filings that explains why its FCF metric is not true GAAP free cash flow. A half-page!

In effect, AMZN’s true long term debt commitment is $46.4 billion. Funny thing about that, AMZN’s book value is $31.4 billion. One of the GAAP manipulations that AMZN used to boost its reported EPS is it folded most of the cost of acquiring WFM into “Goodwill.” Why? Because goodwill is no longer required to be amortized as an expense into the income statement. For presentation purposes, this serves to increase EPS because it removes a GAAP expense. Companies now instruct their accountants to push the limit on dumping acquisition costs into “goodwill.” But most of the $13 billion in goodwill on AMZN’s balance sheet was the cost of acquiring WFM, which required that AMZN raise $16 billion in debt.

Regardless of whether or not WFM is profitable for AMZN over the long term, AMZN will still have to repay the debt used to buy WFM. In other words, the amount thrown into “goodwill” is still an expense that has be paid for. For now, AMZN has funded that expense with debt. If the capital markets are not cooperative, AMZN will eventually have a problem refinancing this debt.

In summary, the genius of Bezos is that he’s figured out how to generate huge revenue growth while getting away with limited to no profitability. Yes, he can report GAAP net income now, but AMZN still bleeds billions of dollars every quarter. It’s no coincidence that Bezos’ scam mushroomed along with the trillions printed by the Fed tat was used to reflate the securities markets. For now, Bezos can get away with telling his fairytale and raising money in the stock and debt markets. But eventually this merry-go-round will stop working.

The tragic aspect to all of this is that a lot of trusting retail investors are going to get annihilated on the money they’ve placed with so-called “professional” money managers. I don’t know  how long it will take for the truth about Amazon to be widely understood, but Tesla will likely be a bankrupt, barring some unforeseeable miracle, within two years.  Perhaps worse is that the fact that people appointed to the Government agencies set up to prevent blatant wide-scale systemic financial fraud like this now look the other way.  It seems the “paychecks” they get from the likes of Musk and Bezos far exceed their Government pay-scale…

When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.  – Francisco D’Anconia “Money Speech” from “Atlas Shrugged”

The Fed Successfully Destroyed The U.S. Housing Market

What concerns me is when people put their hard-earned money into housing or any other supposed store of value thinking that the sky is the limit. We are living in an age of epic distortions, misinformation and outright fraud. – Aaron Layman, Dallas-based Realtor, member of the Dallas and Houston MLS boards and a housing market analyst

The propaganda about a hot economy, “overheated” housing market and tight labor market is just one of several Big Lies being promoted by politicians and business leaders. The article below references a comment made by a money manager about the housing market “overheating.” But the housing market isn’t overheating. What’s overheating is the amount of “conforming” mortgage debt underwritten by the Federal Government on behalf of taxpayer. I’ll have more to say about this tomorrow.

The transformation of Fannie Mae, Freddie Mac, the FHA and the VHA into the new subprime debt provider has caused a shortage of homes under $500k, or under $600k in “high price” zones. But there’s an oversupply of homes north of $700k in most areas (the Silicon Valley area notwithstanding). But more on this tomorrow.

A colleague and email acquaintance, Aaron Layman, is a realtor in Houston who has been uniquely outspoken about the degree to which the current housing market is unhealthy and dysfunctional. I say “uniquely” because 99.9% of all realtors would sell a roach motel trap to cockroaches if they knew that they could get the cockroach qualified for a Taxpayer-backed mortgage to make that particular purchase (“hey man, this is a good value and prices are only going higher”).

Aaron has written a blog post which details the manner in which the Fed has destroyed the housing market and economy:

If you are out shopping for a home during this summer selling season and you are having a difficult time finding a good property at a reasonable price, be sure to thank the folks at the Fed for their fine work. Destroying a market takes some effort, particularly if you account for all of the PR necessary to cover your tracks. The Federal Reserve and their army of economists have created another fine mess in the U.S. housing market, destroying real price discovery and distorting the real value of a home which is end-user shelter.

Please use this link to read the entire essay – it’s worth your time:  The Fed Has Destroyed The Housing Market

Egyptian Billionaire Put Half His Net Worth Into Gold

Some big investors see warning signs ahead for markets but are holding their positions. Egyptian billionaire Naguib Sawiris is taking action: He’s put half of his $5.7 billion net worth into gold.

He said in an interview Monday that he believes gold prices will rally further, reaching $1,800 per ounce from just above $1,300 now, while “overvalued” stock markets crash.

“In the end you have China and they will not stop consuming. And people also tend to go to gold during crises and we are full of crises right now,” Sawiris said at his office in Cairo overlooking the Nile. “Look at the Middle East and the rest of the world and Mr. Trump doesn’t help.”

Sawiris also has large investments in Evolution Mining, Endeavor Mining, La Mancha Resorand ces, and Egyptian ral esptian real estate can provide several unique benefits. For instance, owning an extra property can provide cash flow for retirement, allowing you to secure a passive income, while at the same time providing an alternative residence choice. It is also typically the case that your property value will increase over time the longer you are able to hold onto it.

With recent economic conditions suggesting that Egypt is in the midst of high inflation rates, we are seeing more people than ever before turning their life savings into property assets. In fact, for the majority of investors, real estate has p

Homebuilder Stocks: Overvalued, Over-Leveraged And Going Lower

I continue to believe that the “lowest hanging fruit” in shorting this stock market is the homebuilders and related stocks. History appears to be repeating, or at least “rhyming” in the housing sector:

Most investors do not realize this, because the majority of traders and “professional” money managers were still in college or b-school during the 2007-early 2009 stock market collapse, but the homebuilding sector actually peaked and began a waterfall decline in mid-2005 (see the chart above). Interest in homebuilding is seen as a novelty nowadays, with some homeowners deciding to buy their forever home instead of building it. This attitude is due to the cost of homebuilding. The closest a homeowner comes to homebuilding is purchasing a fixer-upper house with the idea of renovating it themselves. They can do this with the aid of contractors or through DIY mean with the help of somewhere like Tradefix Direct, which could give them the equipment needed to take on such a big construction project. However, they would still need to contend with mortgages and mortgage rates.

The propaganda narrative is that this time around the subprime mortgage issuance has been contained by regulation. This is patently false. The subprime mortgage game shifted from largely private underwriters to the Federal Government, starting in 2008. Because the Government is involved, it has been well disguised in a “conforming” mortgage costume based on Federal Housing Finance Agency “requirments.” Well, more like “guidelines” than requirements.

The FHA began offering 3.5% down payment Federally guaranteed mortgages in 2008. Its underwriting market share went from 2% to 20%. Not to be outdone, Fannie and Freddie began to offer 3% down payment, reduced PMI mortgages a few years later. Not to be outdone by themselves, and after Fannie reported a $6 billion Q4 loss and required a $3.7 billion cash infusion from the Taxpayers, Fannie and Freddie raised the DTI limit on conforming mortgages to 50%. If the housing market is healthy, why is Fannie Mae receiving cash infusions? A 50% DTI means that the mortgage applicant requires 50% of its gross monthly income to service its monthly debt payments (mortgage, credit car, auto, etc).

A 3% down payment, 50% DTI mortgage is subprime garbage. It also implies that the FICO score is a farce. Some who requires a 3% (in many cases less) downpayment with a 50% DTI does not have prime credit rating. After the DTI ceiling was raised in December, new mortgages with DTI’s in excess of 45% jumped from 5% to 20% of all mortgage issuance in January and February. This subprime mania in its essence – though not name – and will lead to another massive Fannie/Freddie/FHA/VHA bailout.

All of the signs of the top of the last bubble are re-emerging. Home equity “cash out” loans are soaring again at what is likely peak home prices, so banks that have equity loans similar to Atlantic union bank may see an increase in their home equity loans. According to Freddie Mac, cash-out “refis” are at their highest level since 2008.

We saw how this movie ended the last time around. If you forgot, rent “The Big Short.” A private investment management company in California, Carrington Holding Company, has a mortgage lending facility that will now underwrite and fund mortgages to borrowers with credit scores as low as 500. Carrington will do loans up $1.5 million on homes/condos and home equity cash outs up to $500k. Sometimes it is easiest to speak to companies such as Equity Experts to get you on the right track for understanding home equity cash outs. Recent credit events like foreclosure, bankruptcy or a history of late payments are acceptable. This business plan will not end well. It then comes as no surprise that realtors are struggling to find properties to sell, and look to use the likes of this circle prospecting software in order to find prospective properties that could end up on the market.

I recently saw a “for sale” in an upper-middle class neighborhood in Denver which advertised, “no money down, lender on site.” If the market is “hot,” why is this house being marketed as “no money down” and why is a lender at the open house? Is this a Volkswagon “sign and drive” transaction or this is a several $100k home “purchase” at what is likely the market peak?

This is in an area in which the average home sells for over $600k, which means unless the buyer puts down at least $70k, it can’t be backed by one of the Government mortgage agencies (the max loan limit for a conventional mortgage in Denver County $530k – in most areas of the country, the maximum loan size for a conventional Govt mortgage is $453k – Denver County is considered a “high price” area and thus the Government will underwrite a larger mortgage – “guidelines,” not “rules”).

This is the type of home borrowing that occurred in the last couple years of the mid-2000’s housing bubble. That “open house” sign also tells me that the market for homes that can’t be funded without Government assistance is deteriorating.

This housing market is unfolding in an eerily similar manner as the mid-2000’s bubble. Sales volume, prices and rental rates are starting to literally crash in New York City, as I’ve detailed in the last couple of issues. I read an article that said, based on the current sales rate, Miami has a built up a 6-year supply of condominiums. Again, the last time around the bubble began to pop first in NYC and south Florida. Phoenix and Vegas followed those two cities. As I presented last week, the move by Zillow Group to get into house-flipping is the signal for me that those two cities have peaked.

The Short Seller’s Journal provides unique insight to the economic data and corporate earnings – insight you’ll never get from so-called financial “experts.” SSJ then offers ideas every week for making money on this insight. To learn more, click here: Short Seller’s Journal subscription information

Auto Sales Forecast To Tank In April

JD Powers and LMC Automotive are projecting auto sales to drop 8% in April from a year-ago April:

For much of the past two years, the discounts offered by automakers have remained at levels that industry analysts say are unsustainable and unhealthy in the long term…Sales are expected to drop further in 2018 as interest rates rise and more late-model used cars return to dealer lots to compete with new ones. – April Auto Sales Forecast

General Motors reported lousy Q1 numbers this morning. Revenues dropped 3.2% year over year in Q1. Revenues would have been worse but GM joined the rest of the country and extended financing to future deadbeats who took out loans greater than their annual pre-tax income in order to buy a pick-up truck. In other words, GM’s financing unit generated 25% growth in revenues, which cushioned drop in GM’s automotive revenues. Operating income fell off a cliff, plunging nearly 80% vs. Q1. Because of GAAP manipulations, EBIT was down only 55% from Q1 2017.

BUT, GM was credited with a headline “beat” of the Street’s earnings estimates. Only in America can a company’s operating numbers go down the drain and yet still be credited with a headline GAAP-manipulated net income “beat.” I find much humor in this absurdity. Others might find it, upon close examination, to be pathetic or even tragic. Given the forecast for April automotive sales, at least now we know GM announced earlier this month why it will begin to report auto sales on a quarterly basis instead of monthly.

The economy is much weaker than the narrative promoted aggressively by Wall Street, DC and the financial media. This tweet from @RudyHavenstein captures perfectly the divergence between moronic mainstream financial media and Main Street reality. We’re bombarded daily with propaganda about the healthy economy. Yet plenty of statistics show that the average household in this country is struggling under a mountain of debt and is living paycheck to paycheck.

This mostly explains the why credit card debt hits a new record high every month now. The average household is using revolving credit to help make ends meet. The only problem is that, in aggregate, the credit debt is not getting paid down. Rather, it’s increasing by the day. To compound the problem, credit card issuers are aggressive about jacking-up rates when the Fed funds rate is rising. I have a friend who has a 670 FICO score and recently used a loan to buy a car. The interest rate on the loan is 8%. This means that credit cards in general are charging rates in the mid-to-high teens to users with a sub-720 credit score. The outstanding balance will double in 5 years for a card-user who only pays the minimum amount each month on a card with a 15% interest rate. The only problem: that user will likely default before the balance doubles.

But why listen to the Orwellian propagandists?  Just follow the money from corporate insiders: The graphic to the right shows the ratio of insider sells to buys. When the ratio is under 12:1, it’s considered “bullish.” When the ratio is over 20:1, it’s considered bearish. In the last couple of weeks, the ratio has spiked up over 35.

It would seem the Atlanta Fed agrees with the assessment that the economy is far weaker than is being promoted by politicians and Wall Street. Back in February, the Atlanta Fed was forecasting Q1 2018 GDP to be 5.4%. Since then the Atlanta Fed has cut lowering its forecast almost weekly. This past week it chopped its Q1 GDP forecast down to 1.9%.

How can you profit from this insight?   I’ve been presenting several “off the radar” short-sell ideas in my Short Seller’s Journal from which myself and several subscribers are making a quiet killing.  Right now the easiest money to be made in the market is shorting homebuilders.  I have have a subscriber who made 150% on DHI puts in the first 30 minutes of trading today. I have another subscriber who is short Lending Tree (TREE) from $340.  I got this email from him today, with the stock down $42 to $264:  “The TREE keeps on giving. Many thanks!”

Every time the market bounces now, or when individual “daytrader/algo” stocks pop on headline “beats,” it creates an opportunity to make easy money shorting stocks or buying puts.  The Short Seller’s Journal provides unique insight to the economic data and corporate earnings – insight you’ll never get from so-called financial “experts.”  SSJ then offers ideas every week for making money on this insight.   To learn more, click here:  Short Seller’s Journal subscription information. This week I’ll be presenting an oldie but goodie short that soared today on tepid numbers (no, it’s not Facebook).

Just wanted to give you kudos for for your Short Sellers Journal. i find myself waiting every Sunday to read your publication. Your research and conclusions ring true. One of the better newsletters I receive. – recent subscriber feedback

Wells Fargo Peddles Fraud

I would have thought that after all of the fraudulent, illegal and unethical business activity for which Wells Fargo has endured, a situation placed in their lap by a concerned citizen would have received immediate attention. What’s most appalling about the story below is the haughty indifference with which this potentially criminal complaint was treated by Wells Fargo employees. While Wells has received some heavy wrist-slapping for getting caught with its pants down, its seems based on the bloated compensation awarded to the CEO and the fact that, based on the true accounting below, Wells doesn’t seem to mind continuing to operate with its pants and underwear draped like a pedophile around its ankles. Mike – aka Silver Farmer (@nhsilverfarm) – has written a stunning report of his attempt alert Wells Fargo of a potentially criminal fraud situation involving Wells Fargo checking accounts – one that may involve fraudulent bank accounts opened by Wells employees:

I’m Mike and up until now, I’ve remained behind the scenes as an audio editor and producer for some of the more popular liberty minded programs out there today. I want to share this story of fraud that centers on habitual offender, Wells Fargo. In life, I have only my credibility and am more than willing to provide the emails that confirm everything I am about to relay.

After nearly 15 years, my wife and family are leaving the house we built. The property taxes having tripled in that time. We are intentionally downsizing, and have a number of valuable items to sell. I started posting ads for these items on Craigslist just over a week ago. There were a handful of items over $300 in value and for every one posed, I got several offers to accept payment by check from out of state and then ship the items to a buyer. I might live in the sticks of rural New Hampshire, but I had heard of these scams, so I decided to play along with a few.

The first was pretty low brow. I had to check my spam folder fro an email from “PayPal” saying that $1000 would be released to me if I sent a Western Union Money Gram to a woman named Deborah in Oklahoma. She was, you see, the mover that was going to pickup my air conditioner. Before I tipped my hand that knew that this was a scam, I contacted the police in my town, the town where the money was to be sent and the FBI.

The next two scammers asked for my address to send a physical check to. This sounded more interesting. I figured, what the hell, I will give them my address, I’m moving and it is public record anyway. Both had similar stories. The check I was to receive was “accidentally” made out for more than my item for sale because the assistant made a mistake and added my price AND the cost of having the item shipped into one check.

So 3 and 4 days later, respectively, I had priority mail envelopes in my mailbox, each containing a check, printed on real check stock with watermarks and other security features, from businesses far away from the return address on the envelope. I did a quick internet search, and found the phone numbers of these very real businesses. One was an oral surgeon in Texas, the other an equipment company in New York. I called each of these companies and was informed that these were, in fact, counterfeit checks.

I played along with the scammers, telling them that I had deposited their checks. At this point, one dropped out from communication, so I was down to one. In the mean time, I contacted the FBI and the postal inspector, both of which referred me to an online complaint form, which I filled out and heard nothing back from.

I told the last remaining scammer on Monday that his check had cleared. He immediately emailed me with the account information of the “mover” so I could wire the excess funds there.

And what account did he send me? Why a Wells Fargo Business account.

I called Wells Fargo and they confirmed it was an active account. I then dropped the bomb. I told them the above story and…literally crickets. The woman on the phone expressed no interest at all that one of their accounts was being used to receive funds from check fraud. I got irritated and a bit rude, and told the Wells employee that I didn’t think that Wells Fargo needed any more black eyes, and if she would not take me seriously, I was going to the media. She then forwarded me to Tim in Minneapolis. After a long hold, I explained the story to Tim. I offered to send a picture of the check and all the emails (Which I am happy to provide to anyone on request). He was not interested and then after about 5 min, he disconnected, without warning. I tried for another half hour to get back to him or find anyone who wanted the information I had. Nobody at Wells Fargo cared. No word of a lie. No concern at all. They didn’t even want my phone number.

When W Bush helped ram thru the Patriot act, part of that was that positive ID MUST be established to open a bank account. If this is the case, the owner of this Wells Fargo account should be easy to find. So why are they not interested?

Is this just the latest Wells Fargo scheme to allow accounts to be opened without proper documentation to pad the employee bonuses? Is this account owned by a Wells Fargo employee that has a side hustle? Something else?

I am turning this over to the honest media so hopefully there can be some relief. These scammers were quick to spend $10 on priority mail (Which either is linked to something like Stamps.com OR they went into a post office, on camera). And the sheer number of attempts was astounding. On 3 items I listed for over $300 (A canoe, a table and an air conditioner) I got 13 fraudulent offers. All of this tells me that not only does this scam work, that they have no fear of being caught.

And as a final note, I am still stringing along that scammer. He will loose intrest in a day or so. Any suggestions on how I should break it to him? nhsilverfarm@gmail.com

Mike the Producer