Tag Archives: com

If The Fed So Much As Blinks, The Stock Market Will Collapse

Although the stock market has had several “shock and awe” straight up rallies this year, since the beginning of January the graph of the S&P 500 looks like the infamous “bridge to nowhere:”    (click to enlarge)


Up until January, the S&P 500 had risen at a near-continuous 45-degree angle, punctuated with an occasional and very brief 1% sell-off. Every time the stock market attempted to correct, the Fed either rolled out another new QE program in some form or used its regional emissaries to soothe the computer algos and retail investor cattle with sweet nothings designed to jawbone the stock market higher. As you can see from the graph above, the one sell-off prior to this past summer was halted a by a Fed puppet’s call for more QE.

The big plunge that occurred in August was triggered by economic fears and the plunging price of oil, capped by concern about the Fed raising interest rates by one-quarter of one percent.  And of course the Fed rolled out its emissaries to soothe the market and a decision to defer the one-quarter of one percent rate hike.   What does it tell us that  minuscule rate hike threat that looms like a nuclear bomb over the markets?…

The truth is, the markets are so disconnected from the underlying fundamentals that if the Fed were to pause for just a brief moment from its continuous market intervention, the stock market – along with the entire financial system – would collapse.

As you can see from the graph above, while the Fed – for now – has the ability to prevent the S&P 500 from a big sell-off, it’s been unable to push the S&P beyond the upper end of the sideways channel framed in red in the graph above.    And now we find out that the club of inside-connected, highly regarded large hedge fund managers have been unloading their stock holdings into every rally – LINK.

Currently the S&P 500 is being propped up with five stocks – AMZN, GOOG, FB, MSFT and GE.  Collectively these five stocks account for than 100% of the YTD return on S&P 500.  I can’t speak knowledgeably to four of them, but you can find why AMZN is the largest public stock Ponzi scheme in the history of the U.S. stock market in this report:   AMAZON dot CON.    I have an interesting paired traded strategy that I’m working that reduces the risk/volatility of shorting AMZN outright and it will be made available to anyone who purchases the AMZN dot Con report.

Beneath the veneer of those five stocks, there’s a bona fide bear market  going on in many sectors and individual stocks.  We saw this most recently with several retail stocks which went into cliff-dive mode after releasing quarterly earnings.  Some sectors of the market are down 20-50% this year.

Currently just about every possible economic indicator is telling us the economy in the U.S. is starting to collapse.  This is one variable over which the manipulators have no control. The price of oil is about to drop into the $30’s and the price of copper is likely going to go below $2 soon.  By all indicators, retail sales for the holiday season are setting up to be a disaster.  The big retailers know this which is why “Black Friday” sales promotions have already started.

The housing and auto markets are next.  The Fed and Government have once again over-stimulated demand for housing and new cars with subprime lending programs.  Demand has been “pulled forward” and sales in both markets are rolling over.

I don’t know how much longer the Fed can hold up the stock market.  At some point the gravitational force of the collapsing fundamentals will outweigh the Fed’s ability to keep a safety net under the stock market and a lid on the price of gold.  I predict it will get a point in which you won’t be able to get out of the stock market (extended market holiday) and you will have trouble finding physical gold/silver to purchase except in the private market at exceptionally high premiums to the quoted spot price.

The Economy Is Already In A Recession – Holiday Spending Will Be Dismal

The contraction is accelerating and crosses economic lines and industry lines. In fact, one can say 95% of the economy is driven by the consumer. For instance,  Cummins engine is not a consumer stock but if consumer cannot spend the trucking industry dies. – my colleague, Hal

The Government/Fed can print money to keep the banks from collapsing and to keep the financial system “solvent,” but it can’t print economic activity.  To be sure, opening up the easy credit spigot to car buyers caused a temporary bounce in auto sales.  But this is not sustainable.  At a certain point, the availability of car buyers who can support a monthly car loan payment gets exhausted.  Over 30% of all new cars sold to the private sector are now financed with sub-prime and deep sub-prime loans.  Car repo rates are going through the roof according to my sources in the industry.  Recently a high percentage of car sales were “fleet” sales to the Government.

The truth is, nearly all “organic” economic indicators are showing that the U.S. economy is in a recession.  At some point the narrative that entire world is in a nasty recession except the U.S. economy is going to prove to be a fairytale.  The continued collapse in copper and oil prices reflects this.

Most of the major privately-compiled economic series have been declining down to their 2008/2009 levels and heading lower.  Just this morning, for instance, the industrial production report showed an unexpected .2% drop for October.  The Wall Street brain trust was looking for a .1% gain.

I wrote an article for Seeking Alpha in which I discuss three major indicators which show that the U.S. economy is already in a recession similar to the one that hit in 2008/2009:  The Economy May Already Be In A Recession:  Short Retailers.

Last week the stocks of Macy’s, Nordstrom and Advance Auto Parts all took nasty cliff-dives after their earnings reports.  The results and the accompanying management commentary indicated that retail demand hit a wall in August and the outlook is dismal.  Yesterday it was Dillard’s turn to take a digger, as it missed earnings and revenue bogeys already set very low by Wall Street:


From the time Macy’s reported on Friday thru yesterday, after Dillards reported, Dillards stock had shed over 14% of its market value.  This tells two things:  1) market expectations built into stock valuations are way too high and 2) the economy is in trouble/retail sales over the holidays will highly disappoint.

The best way to play this is with Amazon.com.  This stock is by far the most over-valued stock in the S&P 500 on a P/E basis.  The hype, hope and manipulation built into AMZN’s stock is at levels not seen since the tech bubble.  The Company is already quietly offering Prime members a $5 “gift card” if they just download the Amazon phone app and log in. It’s just another form of a “pre-Black Friday” sales promotion.

As my report shows, on a true accounting basis, AMZN is still generating negative free cash flow and is using every accounting gimmick under the sun to cover this up.  My latest AMZN report has updated options and capital/risk management ideas.  You can access the report here:   AMAZON dot CON.

Amazon stock has gone parabolic.  It’s one of the most irrationally priced stocks I have ever observed in over 30 years of participating in the financial markets.  There is a lot of money to be made on the downside and my report shows how and why.

AMZN Is The Stock Market Bubble Poster Child

Don’t take it from me, this is a comment that was emailed to me this weekend:

Druckenmiller thinks AMZN can raise prices anytime it wants. But its entire business model is based on price as a competitive advantage. The service is quick delivery, easy order. Well most of hte big companies have easy order on the web.  Also easy delivery if you are willing to pay for it. So what’s the competitive advantage? AMZN has just about everything?

I use Amazon less now that they have to charge sales tax of 7% where I am and 10% in Chicago/Cook County. As we have discussed Amazon is losing that advantage.

I think there is a big issue of just what is Amazons competitive advantage? If it’s price–they have to attack a litany of companies, all with bigger and better balance sheets. That war could take a number of years. When do shareholders of AMZN wake up and see AMZN is not making money while Walmart is making money and pays a 3.3% dividend to boot?

This is what the stock chart looks like of a company that is in extreme bubble mode.  Go back and lookUntitled at the stock charts of every single tech stock at the peak of the internet/tech bubble.   Need I remind anyone that the NASDAQ plunged over 90% when that bubble popped?

AMZN is going to go out of business, but its stock price has disconnected completely from the reality of its underlying business model.  Stanley Druckenmiller erroneously and foolishly added rocket fuel to the stock move with assertions that were 100% incorrect.  My updated report stock report goes over this in detail.   AMAZON dot CON.

Click on the image to access this report.  I am going to raise the price again after AMZN reports Q4 and its 2015 full year at the end of January.

From my update and full reports:   As we’ll see, it’s apparent that Druckenmiller had not done any of his own research on the Company. He was likely belching out the smoke some Wall Street salesman blew up his ass. He for sure did not dissect Amazon’s financial statements filed with SEC.


AMAZON dot CON: “Black Friday” In July

By way  of background, I was a former financial statement auditor for one of the top accounting firms in the Silicon Valley. I audited many of the high fliers that crashed and burned, took companies public and was at the printers the day the bubble really burst which ultimately tabled that  particular 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.  – comment from a reader who has read my AMAZON dot CON report.

Amazon.com stock is in the midst of an epic parabolic short-squeeze. It’s vertical lift-off is
presumably in advance of its heavily self-promoted “Amazon Prime Day” on July 15. It’s
“exclusive” to Prime members and supposedly will have feature sales prices which are better than “Black Friday.”

“Black Friday” in July? Hmmm…this can only mean one thing: AMZN is desperate to
generate sales in the face of declining retail sales. With Prime membership sales, AMZN
gets to take in $99 cash upfront. This will stimulate sales because Prime members are
entitled to free two-day shipping. But as you know if you read my research report, on a
cost-accounting basis, AMZN loses money on Prime sales once Prime sales per member
reaches a certain level. This is because the cost of two-day shipping – part of AMZN’s
gargantuan cost of fulfillment – eventually exceeds the profits from selling items plus the $99 paid upfront.

With the caveat that the Fed seems to be intent on pushing the entire stock market higher without any regard to the actual underlying fundamentals, I believe that AMZN is a great short-sell opportunity right now, both for a short term swing trade or for longer term large capital gains.


To be sure,  if the Fed does manage to move the market up from here, there’s no point in shorting anything.  Fed intervention has forced just about every short-sell oriented hedge fund out of business.  I’ve never seen a market in which almost everyone is standing on the same side of the boat.

Having said that, when the event hits the system that is beyond Fed’s ability to control, the stock Amazon dot Conmarket will crash.  Shorting stocks can yield extraordinary profits in a short period time.  This is especially true with stocks like AMZN where the trend in net income is inversely correlated with the direction of the stock price.  In fact, the day that second break-away gap (right side of the graph above), AMZN reported a large net loss for its first quarter.  Not only that , but its “non-GAAP” phony earnings declined 17% from last year’s phony “non-GAAP” earnings.

In short, this stock is a joke and it’s market cap is absurd.  I’ve updated my AMAZON dot CON report with a brief discussion of why its Prime membership program loses money and will likely always lose money.  Then I discuss trading strategies, including a detailed section on using puts and calls:   AMAZON dot CON

The above report is based on AMZN’s numbers through year-end 2014.  I will be updating the report in the next few weeks with AMZN’s latest numbers.  AMZN is reporting its Q2 on July 23.  Although the updated section will available to current and previous buyers of the report, I will adding some additional analysis based on information I have received which makes the fundamental condition of AMZN even worse than I thought.  I will also be raising the price of the report.

Amazon.com Goes Full Retard

AMZN_DASHAmazon unveiled its “Dash” button.   USA Today prefaced its news report by stating that it’s “not an April Fools’ joke” – article link.   The “Dash” button is an electronic button that allows users to automatically order frequently used items from AMZN’s online marketplace by pressing a button which sends a wifi signal to the AMZN app on your smartphone which re-orders the product represented by that “button.”

How many of you out there want to have AMZN “dash” buttons all over your house for each product you use?  Currently the buttons are being sent to Prime members by request. This product is yet another in a long line of gizmo-type ideas on which AMZN millions in capex only to lose even more money after all expenses are netted from the revenues the idea generates.

AMZN may incur close to a half billion in operating losses in its first quarter of 2015.  This isn’t my projection – this is the lower end of the Company’s year-end guidance for Q1.  We’ll find out the results on April 23.   FactSet recently revised its earnings forecast for AMZN from +15 cents to -13 cents.  Last year Wall St. was forecasting a 22 cent profit for Q1.  AMZN reported 23 cents.

As I’ve detailed exhaustively in my Amazon dot Con stock report why both AMZN’s operating income and net income is declining precipitously and materially.  AMZN’s own definition of “operating free cash flow” is exceedingly misleading, if not fraudulent.  I show why in my report.   In fact, AMZN throws a well-hidden “disclaimer” on its own definition of free cash flow in its 10Q/10K.

Do you get these facts from Wall Street or from your friendly financial advisor/planner? No. But you can get them from by reading my research report.   My report will save you money if you own AMZN and will help you make a lot of money if you are willing to short it with patience.  I show how  in my report.

The quality of your content is incredible.  Your work shows not only why AMZN will eventually hit the wall, but it shows that the fraudulence embedded in our financial system runs all the way up to the highest levels – in this case FASB (Financial Accounting Standards Board) and the SEC.   Your work shows in detail how the Amazon Ponzi scheme is constructed right in front our eyes and everyone who owns the stock is clueless.  It’s the best $25 I’ve ever spent on financial research…Scott in Arizona

Smart Money Is Selling…

…Goldman, Citi, Deutsche Bank (Zerohedge.com).    And then there’s this from Mark Faber, in response to a lead-in statement from Erin Ade of RT that the S&P 500 p/e trades at 17.6x trailing earnings:

“(deep laughter) I have to laugh. Who knows what the earnings are. They’re like the statistics published by the U.S. Government. They’re probably all doctored. So maybe on a normalized basis the S&P 500 p/e is maybe much higher. All I know, and this is a relatively valuable measure of valuation, the price to sales ratio of the S&P 500 IS at the highest level ever.  And sales are less doctored than earnings.”

You can listen to the rest of the interview with Faber here:   U.S. Stocks To Correct 50%.

As Faber points out, the income statement line item below the revenue line at every public company in America is manipulated.  Some, like Amazon.com (AMZN) and the homebuilders,  are manipulated much more than most others.  The SEC lets Tesla get away with manipulating its revenue numbers, which is beyond criminal.

My research reports on the homebuilders and on Amazon.con go into explicit detail which shows how these companies are manipulating their numbers in order to present highly misleading operating and net income numbers.  As an expert in GAAP accounting, if these companies were forced to re-state their earnings using the GAAP accounting standards in place in 1980, they would all be reporting huge losses, especially Amazon.

As an example, AMZN trades at 2x sales.  Retailers historically and currently trade well below 1x sales.   For instance, Walmart trades at .6x sales and Target at .7x sales.  And that’s in an insanely overvalued stock market.  But it gets better.   WMT trades at 7.9x operating income and TGT at 6.8x operating incomes.   BUT Amazon.con trades at 977,528x its 2014 operating income!

My research report on AMZN shows in documented detail why AMZN does not deserve a huge valuation premium to companies like WMT and TGT.  In fact, because AMZN’s operating income has been declining every since 2004, as I show in my report, it can be argued that AMZN should trade at a discount to the WMT/TGT multiples.

Read my report and find out why AMZN is insanely overvalued:   AMAZON.CON  (reader testimonial:  “By the way Dave your ideas regarding Amazon.con were the best I’ve ever heard!  When it finally turns around and crashes it will be something for the history books!)

I include a section that discusses using options to short the stock and to help manage the volatility risk of a highly manipulated market.  And believe me, if big hedge fund managers like David Tepper are dumping stocks, I can guarantee you that most smart money hedge funds are dumping  AMZN into every rally that has volume, as AMZN is one of the largest holdings in the hedge fund world.

The Best Way To Set Up For The Inevitable Stock Market Crash…

Short AMZN or be prepared to short AMZN.  Every single day the stock market valuation of AMZN becomes more widely separated from the Company’s fundamentals.   Retail sales?  Retail sales dropped 1% in December  How is that possible when December should be the best of the year?  Retail sales dropped another 1% in January.   AMZN LOST money in 2014.  How many of you know that?   Not only did they lose money on a GAAP accounting basis, they literally hemorrhaged cash.  How do I know that?   Because they had to issue $6 billion in debt in early December. This sums up the ONLY reason AMZN’s stock has been going parabolic since early 2009:


QE has largely ended folks.  Look at how quickly the volume is drying up in AMZN.  That is a big bear indicator.  It trades at 34x EBITDA. And I show in detail why that GAAP EBITDA is highly misleading.

My analysis of AMZN is unique.  There’s nothing like it that has been published.  I delve deeply into AMZN’s numbers – I go all the way back to 2004.  I show how and why AMZN ultimately loses money on its entire business model.  You can access this report here:  AMAZON DOT CON.

The stock market probably won’t crack to the downside tomorrow or even this month.  But you should be prepared and set up ahead of time – and understand why – to take advantage of when reality gets a grip on the markets.

Here’s testimonial on someone who made a lot money shorting one of my homebuilder ideas.  This idea made a lot of money for anyone who shorted this stock in late summer despite the run-up in the sector in correlation with the rest of the stock market:

Hello – I’ve never got a bigger return for the value. I paid $25 for the report, 4k invested in XXX Jan 15 16-strike puts since August and closed today for $3.2k of benefit. What report do you think still have big drop potential? Have a nice day and thanks for your work again.  (He bought my AMZN report).