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.

This Disruption Will Soon Hurt Restaurant Stocks

The restaurant industry has always been a competitive business. With the advent of food delivery apps, the competition has intensified. The net effect of the food delivery boom — once incremental sales fade — will be to significantly lower profit margins at the restaurant level. Lower margins along with weaker consumer spending on discretionary items will put immense pressure on restaurant stocks.

What Is Scarcer: Oil or Printed Money?

The plentiful global oil supply is often taken for granted, but a stark reminder of the vulnerability of the oil market was exposed in last weekend’s attack on Saudi Arabian facilities. Businesses are much more influenced by oil prices than if their credit line were one percentage point lower, as it is much easier to print new money than to sustain enough oil production to satisfy global demand.

Conditions Are Ripe for a Crash

There are specific conditions where a market crash is highly likely to occur. This likelihood increases when most traders are playing similar strategies and have the same expectations for their investments. This creates a market that while setting new all-time highs, becomes increasingly fragile. When conditions abruptly change, bulls panic and prices can fall sharply.

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.

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.