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Dan AmossDan Amoss

Dan Amoss, CFA, tracks aggressive accounting and other red flags that markets miss. He’s a student of the Austrian School of economics and Daily Reckoning fan since 2000. Agora Financial relies on Dan for macro market commentary as well as profitable plays like his 2008 call to readers to buy Lehman Bros. puts, which gained 462% as the stock fell from $45 to $12. And he called American Airlines’ bankruptcy long before the Chapter 11 filing, telling readers to short the stock, which tanked from $6 to just 26 cents.

Formerly, he was investment adviser to one of the top small-cap mutual funds in the country. He grew up on a semi-working small farm that his great-grandfather bought in 1907, learning thrift and the value of hard work through generations. 

This informs his drive to seek truth and expose frauds and promotions that suck in investors. He cut his teeth in finance interviewing management teams in “roadshows” and so knows the kind of BS they sell.

His bottom-up investing style focuses on management strategy, return on capital and the truth (and lies) buried in financial statements.

Conditions Have Greatly Improved for Short Sellers

China’s recent trade war retaliation of weakening the yuan against the dollar will negatively impact global economic health. Along with negative market reaction to the Fed’s position on rate cuts in the future, all signs point to a crisis in confidence. These conditions greatly improve short selling as companies are exposed to an economic slowdown and trade war fears. Also, Dan reviews recent developments for positions in our portfolio.

Dark Money Sell Alert: Time to Take Big Gains on Two Trades

Shares of Poly have been under sustained pressure as acquired debt has proven a big mistake for shareholders. We expect a guidance cut in today’s earnings report but this put option has nearly doubled in just a week so let’s take gains now. Also, considering how rapidly credit and currency conditions are deteriorating in both China and Hong Kong, shares of HSBC could fall a lot more as the bank is massively exposed to both credit risk in both economies. We have good conditions to take a profit now on our puts so let’s take gains.

Project Prophesy Portfolio Update

The Fed rate cut at the latest FOMC meeting came as no surprise to Wall Street. What did come as a surprise was Chairman Powell’s comment that it might be the only cut we’ll see the rest of the year, and markets plunged as a result. As long as the Fed doesn’t promise more rate cuts, we’ll likely continue to see risk-off trades push stocks lower and gold prices higher. This could directly affect positions we hold. For now, read on for Dan’s analysis on all open recommendations in the portfolio.

China’s Credit Bubble Matters More Than Trade Negotiations

While most investors are worried about ongoing trade talks between the U.S. and China, a bigger threat is happening in China’s financial system. China has blown the biggest credit bubble in history. If President Xi is forced to impose much stricter capital controls to resolve his country’s credit problems, there will be an unlimited printing press and a devaluation of the yuan. As a result, investors who own Chinese stocks and ETFs trading on Western exchanges will suffer.

Paradigm Shift in Markets Could Favor Short Sellers

Investors expect the next round of Fed rate cuts next week will push Treasury bond yields even lower and stock prices even higher. But good returns are simply future returns being pulled forward by the “present value effect.” The danger is future earnings that are awarded a high present value often fall short of expectations during rate-cutting cycles.