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Amazon.com Inc. Message Board

  • n59218 n59218 May 12, 2011 9:03 PM Flag

    He started his short position with these 14 reasons

    A very good trader friend of mine executed his short position in AMZN today at 206.07. He
    shared some of his beliefs/opinions with me on taking such a position. Jotting down here
    for everyone's enjoyment:

    - the fall in earnings and negative free cash flows- after backing out capital
    expenditures and changes in short term liabilities- should be a concern for investors.

    - recent profit decline eliminates it as a long-candidate in a lot of momentum
    methodologies

    - such parabolic rise is generally met with a catastrophic fall later

    - reported earnings gains of 15% is a radical departure from the expected-50% growth
    experienced earlier

    - cash flow problems can not be ignored as an exception because Amazon is actually
    showing declining profitability.

    - Amazon's profit declined 33% last quarter while revenues jumped 36%: the profit decline
    can not be taken lightely as WS pumps make one believe

    - free cash flow that is almost entirely made up of increases in short term liabilities
    implies lower multiple is in the offing

    - analysts are fakely leading all little lemmings' herd back to the slaughter-house,
    while the poor weaklings are incapable of understanding the distribution happening
    right in their face

    - Other than cloud-infra portion, that may be worth $50 at most, afterall its a retailer
    specializing in discretionary products that does not deserve such high valuation, given
    the budgetary and austerity headwinds that we are facing in the economy

    - Congress will not allow a sales-tax-free nirvana for any enterprise anymore, when the
    treasury needs revenue so desperately in the face of the shortfalls, he thinks.

    - The short term oscillator is creating a bearish divergence and is confirmed by
    declining up volume, in an extremely-overbought, post-news scenario.

    - Many AMZN holders are starting to let the greed get the best of them. They are ignoring
    the advice of Warren Buffett: "Be fearful when others are greedy and greedy when others
    are fearful." Obviously, AMZN shorts are not the greedy ones; in fact they are the most
    humbled-down creatures on the planet currently and many presently started feeling that,
    it would be best to jump off a cliff, rather than endure this daily pain of single-
    entity-irrational-exuberance of the gone-mad crowd! This is the case of a parabolic-rise
    in optimism in the short term (a move worth 46 points in a mega-cap in a few weeks), a
    psychologically-perfect point to enter the other realm.

    - After looking at the exponential rise in his net-worth in just 4 weeks, the big boy
    JeffB might laugh so hard that, the laughter-waves might agitate the pacific-ocean via
    chaos-theory, resulting into a reflection-tsunami that may in turn slam the Seattle
    coast.

    - The point of going long anywhere is to get a better reward at reasonable risk - not the
    case here anymore - this may suddenly drop 20-30 points in just two sessions any day,
    while the upside is mere 2 points, as per his calculations!

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AMZN
429.86-8.24(-1.88%)Jun 29 4:00 PMEDT