Clownishness, much like beauty, stands in the eye of the beholder. So let's gather together to behold a clownish trade. Granted: playing Monday Morning quarterback to lame stock trades is a bit selective, even venal. But in the end, you learn from analyzing mistakes. Plus, what's more fun than making fun of missteps and pratfalls? With all that said, welcome to the next installment of the Clownish Trade of the Day…
As a dark cloud hovering over a stock, David Einhorn is pure genius. His Lehman Brothers short? Enough said.
Einhorn even wrote long book on a single short. "Fooling Some of the People All of the Time," about Allied Capital (AFC). Also: enough said. Einhorn seems to have a magnetic pull toward impending doom. (Insert your own joke about his investment in the Mets here.)
That's why when the incisive Einhorn speaks publicly about stocks he doesn't like, well, the blood tends to drain from the faces of its holders.
Enter the curious, clownish case of Amazon (AMZN). Einhorn, to be certain, did not recommend shorting Amazon, as he did in the past with basket cases like MBIA (MBI) and Green Mountain Coffee (GMCR). But even when he is only assumed not to like a stock, as in the case of Herbalife (HLF), the stock plummets. All Einhorn did there is ask pointed questions about their finance and it was look out below.
But not Amazon.
Einhorn gave Amazon a verbal beat down, terming it a "riddle," when speaking at the Sohn Investment Conference yesterday. He held his nose at their inability to expand margins despite soaring revenues and even made fun of founder and CEO Jeff Bezos, a secular saint in some circles, comparing him to Batman.
But Amazon, clownishly, was basically flat and even enjoyed a relatively strong afternoon, retracing ground.
To give some perspective, Einhorn bad mouthed Martin Marietta Materials (MLM) in similar fashion and the stock dropped over 8 percent.
Yet there Amazon was, basically running in place. Look: Einhorn is not the Oracle of Delphi. Like everyone, he has missed the mark. But ignoring him altogether on Amazon while taking everything else he utters as an article of faith? That's akin to simply shrugging at the Oracle after she tells you a dragon is about to eat you.
At the very least, you owe it to the Oracle -- much less Einhorn -- to think it through. But a flat stock is evidence that trader's senses have left the fold---and folding is something Einhorn does not do lightly. His acumen even helped him win the World Series of Poker. Seriously, this is not an intellect to trifle with.
You don't have to agree with Einhorn. He has been wrong before. But ignoring his warnings is simply a clown's game.