3 Overvalued Stocks To Sell Or Sell Short

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Includes: AMZN, CRM, LNKD
by: Hedgephone

Let's be frank, this week's announcement that the Fed is tracking anyone who says anything negative about the central bank on the blogosphere has huge implications for certain stocks and the overall free market. If the conspiracy folks are right, the powers that be have been, well, manipulating the socks off of the short sellers in equities and the metals markets lately. In any event, it's clear that nobody remembers the tech bubble these days. If they were old enough to remember the crash they wouldn't touch many of these high flying web names at current valuations.

If you listen to the kids down at the Occupy Wall Street protests, Alex Jones at www.infowars.com, or Ron Paul you will here that Wall Street interests more or less run the government at this point and have created massive scams to part people from their wealth. It's pretty obvious that America has become far too obsessed with the markets versus, for example, localized subsistence farming.

When it comes to the following three stocks, I think some truth exists in such a "conspiracy theory" -- why are these stocks so insanely overvalued? The markets are clearly not efficient and the idea that LinkedIn (NYSE:LNKD) is 40X better than AOL (NYSE:AOL) simply doesn't pass the smell test, just as Netflix (NASDAQ:NFLX) at $300 didn't pass the smell test either.

I view the technology web 2.0 bubble as a political asset which is being used by the bankers to hold up the markets and as a Wall Street investment banking asset to issue IPOs at absurd multiples. These 500X earnings, 20 times revenues issues are the carrot on the stick, or the rabbit at the dog track in my view which is used to keep all of us motivated. In the end, it is clearly at least in part an outright scam perpetrated on the U.S. people that the tech bubble has returned to the degree that it has. I don't view new media as a scam, however, I do view some of the web 2.0 stocks at 500X earnings as "Enron light" at this point. The media has played a significant role in the 1990s technology bubble. Are they are simply repeating the sins of the past?

With stocks like these trading for 500X earnings, Wall Street can set the agenda and can decide what IPO issues are worth and therefore "rig" the pricing mechanism for the ensuing pump and dump and thereby separate the people from their savings. The bubbles are real but the stock prices may not be efficient... Keep in mind, you have to have serious cojones to short Wall Street's "flagship" pumps before the inevitable dump.

Here are three of the worst offenders in my opinion:

Salesforce.com, inc. (NYSE:CRM) -- The government, Cramer, Fox News, CNBC, and almost every other major media outlet continues to hail "cloud computing" as the next big thing in technology. Of course, the greatest con men always shroud their lies in an air of half truth -- cloud computing is very real, it's just that Success Factors and Salesforce's market valuations are more or less a work of fiction at current levels. If you listen to a Ron Paul or Alex Jones, they will explain to you that the real reason for the "cloud" being so prominent is that the Wall Street government (I'm paraphrasing them here) wants to move all of our data onto their servers so they can control our information. To wit, Salesforce has recently signed contracts with the US government to move the nation's data onto the "cloud." CRM shares are overvalued at 500X earnings -- at least Enron had fake earnings by which Wall Street analysts could place a "fair" value upon that had something to do with reality, or at least this is what a true conspiracy theorist would argue. With Salesforce today, it seems the nosebleed multiple is just a useful tool to keep other technology shares in a speculative bubble and to rig the stock market. If the bankers can point to CRM and say, "hey look if you innovate you get rich," they can price anything at any price and get you the shareholder to take the insiders out of their shares at ridiculous prices.

Amazon (NASDAQ:AMZN) -- If you wanted to destroy the economy and jobs, simply support a company like Amazon which has a knack for taking jobs away from retail stores with human employees. The fact that our government somehow expects companies like Amazon to save the jobless is in my view absurd. Amazon has arguably helped to destroy hundreds of thousands of jobs from killing off competitors like Transworld, Borders, Five and Dime, your local general store, Blockbuster etc. Expecting automation to magically drive the job market forward is almost laughable -- like saying smoking Marlboros cures lung cancer. It is, in fact, akin to expecting the gentlemen who got us into this mess to lead us out of the crisis going forward, which is exactly what we are doing with Geithner, Bernanke, and the investment bankers in charge of the mess they created. Amazon shares are ridiculously overvalued at 102X earnings and 70X "forward" earnings in my view. Cramer recently mentioned in Mad Money that he would use the Amazon tablet news to sell the stock. We couldn't agree more.

LinkedIn -- The fact that our president, who is under fire for possible scam artistry after giving a speech at Solyndra a year ago, is brazen enough to speak at a LinkedIn town hall meeting is pretty sketchy in my view considering LNKD looks to be about as conservative an investment as Solyndra given LNKD's PE ratio of 450X earnings. To put that in perspective, if LNKD were to trade at 7X earnings, which is the PE of Hess Corporation (NYSE:HES), the stock would have to fall some 95% from current levels! In other words, while LNKD won't go bankrupt any time soon, LNKD investors could very well see a capital loss on their investment of some 50-75% in the near future if any type of mathematic reality takes hold or growth does not materialize rather quickly. Personally, I would have liked to see Obama speak at AOL, Yahoo (NASDAQ:YHOO), or United Online (NASDAQ:UNTD) headquarters because at least these stocks are valued at a somewhat reasonable multiple and are decidedly not Wall Street IPO ponzi scams. At a forward PE of 250X, plenty can go wrong for LinkedIn investors and little can go right even in the very best case "game changing" scenario for the business. Once the lockup period is over in November, look for these shares to trade much closer to the $25 level than the $100 level.


Disclosure: I am short CRM, LNKD, AMZN.