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Dave Kranzler's  Instablog

Dave Kranzler
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I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance. Currently I co-manage a precious metals and mining stock... More
My company:
Golden Returns Capital
My blog:
Investment Research Dynamics
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  • Subprime Consumer Debt Soars To 7-Year High

    This will not end well: "The trend stems from lenders and investors seeking high yields in a low-interest rate environment. So it's no wonder that total household debt rose $306 billion, or 2.7 percent, in the fourth quarter from a year earlier to the highest level since 2010." (Newsmax)

    Subprime lending as a percentage of total consumer lending is now close to where it was right before the financial collapse of 2007 (click to enlarge):

    Of course, if you blow away the Orwellian smoke from the Graham-Dodd legislation, U.S. lenders of all varieties are not subject to less scrutiny and oversight than before the de facto financial collapse in 2008.

    The Fed's 6-year ZIRP policy has created a situation in which banks and other financial institutions are now taking excessive risk in order to pick up yield:

    Lenders' interest in customers who were the hardest hit by the financial crisis reflects…firms' desires to take more risks at a time when ultralow interest rates are depressing profits. (Wall Street Journal)

    This is setting up the next catastrophic systemic financial melt-down and will be the excuse the Government/Fed is looking for to roll out a QE4 program that will have to be larger than the last time around…

    In connection with this information, THE best way to play a subprime debt blow-up is to short Amazon.com (NASDAQ:AMZN). AMZN plunged from $407 to $284 at the beginning of 2014 thru early May. It has been unable to hit a new all-time high despite the SPX hitting new highs nearly every day now. I have a report available that will explain exactly why AMZN is eventually going to hit the wall: AMAZON.CON

    Mar 02 9:40 AM | Link | Comment!
  • A Key Reason Why Housing Will Crash

    Top 4 largest occupation sectors in the United States all in the low wage service sector paying $10 an hour or less…(MyBudget360.com)

    I have been making this argument ad nauseum. But housing bubble bulls have not just rose-colored glasses on, but they are blind. From the link above:

    People have a hard time wrapping their minds around the economic fact that the top employment sectors in the United States are all made up of occupations in the low wage service sector. We define low wage as a job that pays $10 an hour or less. The press doesn't really highlight this working poor segment of our society even though a large percentage of our population is employed in an industry that pays very little and offers scant benefits (if any)

    This is why the first-time buyer segment of the market has plunged from 40% of unit sales historically to under 30%. And this under 30% of a MUCH smaller sales pie (click to enlarge):

    Does that look like a "recovering" market? The homebuilder "sentiment" index was released today and it not only missed expectations but it dropped from 57 in January to 55 this month. The "prospective buyer traffic" index plunged from 44 to 39 - 39 is a very bearish reading by the way. Of course, the National Association of Homebuilders blamed the drop on the weather. BUT, the region which was most affected by cold weather during the measurement period - the northeast - saw its "prospective buyer" metric rise from 43 to 48.

    The housing market is getting ready to fall hard. Both the poor fundamental economic condition of the most important buyer demographic - the first-time buyer- and the collapse in the oil economy are going blow-torch the housing market.

    The company in my most recent homebuilder report - Chapter 11 Candidate - is going to hit the wall either this year or next. It is carrying well over $300k in debt per home sold now and it's cash level is vaporizing. This is a home-run short-sell/put option play.

    Look at this way, despite all-time low mortgage rates and the availability now of 0% down payment mortgages in many areas, home sales are declining - and have been in general since July 2013. Despite the NAR's misleading data to the contrary, inventory is piling up, especially in the over $750k price segment.

    Feb 18 4:10 PM | Link | 1 Comment
  • 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:

    (click to enlarge)

    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).

    AMZN

    Feb 13 12:39 PM | Link | 1 Comment
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