The One FANG Stock that COULD Actually Fail (and How to Play It)

Keith Fitz-Gerald Nov 20, 2019
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According to Facebook founder Mark Zuckerberg, he didn’t intend to start a business. He merely wanted to solve a problem at Harvard by connecting people he cared about.

I was born in the middle of the night, just not last night.

I think there’s a good case to be made that Zuckerberg and his team have lied about damn near everything. Repeatedly. Intentionally. Often.

I’m not alone, either.

A quick Internet search suggests that the “Zuck” and his team have lied about so many things so often that they’ve lost track of the lies they’ve told.

That’s very, very dangerous for investors.

Unless, of course, you’re prepared for profits ahead of time…

Let’s Get This Straight About Facebook

Facebook not the “Holy Grail” of technology companies, of social media, or even technology providers many investors want to believe it is.

At the risk of being called a heretic (yet again) he company is nothing more than a clearing house of voluntarily contributed personal information that is weaponized against the users who contributed it in the name of advertising, data selection, and political manipulation.

Think of an old-fashioned phone book but with multiple pages behind each listing.

It’s not secure.

It’s not private.

It’s not exclusive.

YOU and your information are for sale.

To the highest bidder or the lowliest lowlife, in many cases, without your permission.

Amazon.com Inc. (NasdaqGS:AMZN) got access to nearly all of your friends, as did Microsoft Corp.’s (NasdaqGS:MSFT) Bing. Yahoo!, meanwhile, got real time access a la the voter quiz app cooked up by Cambridge Analytica. Even Yandex, the Russian search engine, had access.

That’s not even the dirty part, though.

Facebook’s app can reportedly re-grant itself access to your most personal data even when turned off. That explains a lot about why Facebook is so very comfortable with phone markers and why the program is so hard to get rid of, even if you want it gone. I tried, for example, and it’s all but impossible to delete depending on which smartphone you have.

The situation is so serious that the UK-based Register reports Facebook even gave secret access to device makers that bypassed protections intended to prevent them from tying together friends and their friends.

Old news?

Not.

Supposedly Facebook is reining in such nefarious business practices yet more than 100 Facebook app developers apparently had access they shouldn’t have as late as November 5, 2019. That’s when Konstantinos Papamiltiadis, a Facebook employee posting at Facebook for developers, noted the company was “reaching out” to stop it.

November 5th… 2019??!!

More than twelve years after consumers started to voice concerns about what’s happening to their most intimate information and a year after CEO Cheryl Sandburg told Congress during a hearing that the company would only operate in “a country where we could do so in keeping with our values.”

Evidently, the rule of law isn’t one of those things considering that the company operates in places like the United Arab Emirates where people who criticize the government simply disappear. Or, worse, get “disappeared.”

Not that I’m surprised, but Zuckerberg himself seems to be avoiding travel to less exotic locations like – oh, I dunno – London, England or anywhere in the UK where he could be detained for repeatedly failing to comply with that country’s Parliamentary hearings requisitions. That’s via more than 7,000 internal Facebook files that were leaked and which apparently reflect his desire to avoid such unpleasantness.

The company doesn’t apparently just treat customers with distain but vendors, too. News broke last month that Facebook will pay $40 million to settle a score of advertiser lawsuits alleging that the company overstated video views by as much as 900%.

Not 5-10%… 900%.

I get making a buck. In fact, I’m all for it given what I do for a living but selling out your ethics and lying about it is another thing entirely.

Anybody who uses Facebook is going to get “Zucked” sooner or later.

My turn, funny enough, came last week.

I set up a personal Facebook profile and related messenger account only have both hacked within 72 hours. Seventy-two freakin’ hours… then some joker had snarfed a few of my pictures and set up a messenger account to begin phishing my friends.

Zuckerberg went from merely being somebody I distrusted based on his professional behavior to a complete you-know-what in seconds.

I deleted my account immediately. Just like 1 in 4 Americans already have, according to Forbes study.

It’s worth noting that the number jumps to nearly half or roughly 44% of people between the ages of 18 – 29 which is, in turn, roughly 4X the number of users 65 and older who are ditching the social media giant.

This hasn’t had a material impact on Facebook’s stock yet, but I think the day of reckoning isn’t far off.

Facebook is the next MySpace.

I know that’s unthinkable but the fact that so many people regard this as a impossibility what catches my attention and why going against the grain could be a great trade.

Facebook is under tremendous pressure legally. Users – myself included – remain vulnerable to theft and data exploitation.

To say that Facebook scandal-ridden is an insult to actual scandals.

Mark my words, Facebook will end up being an unmitigated disaster when viewed through the rear view mirror a few years from now. The hate factor is rising, and you can see that reflected in the $23 million the company reportedly spent on personal security for Zuckerberg last year.

MySpace users, in case you don’t recall the story, lost access to their own data progressively just as Facebook is systematically stripping users today of theirs. News Corp. bought MySpace for $580 million in 2005, yet sold it for a mere $35 million just six years later.

It was, according to executives at the time, supposed to be the beginning of a data set rivalling Google and Facebook. Now it’s more like, “My…. Who??!!”

Think about it.

Facebook wants you to believe you’re interacting with friends and sharing information the way you would with your grandparents. Only the company is systematically stripping you of your identity the entire time you use it.

Then there’s Facebook’s planned cryptocurrency project Libra. Billed as a global payments solution, in reality Libra is simply “Zuck Bucks.” Like the Borg of Star Trek fame, you will “be assimilated” if you use it and resistance will truly be futile.

Normally I don’t agree with a damn thing that comes out of his mouth, but I think billionaire trader George Soros has it right when he called Facebook a “menace to society.”

Now what?

Shorting Facebook stock is still very much a “widow-maker” trade at the moment, meaning most people are going to lose money trying to bet against the hope and fantasy Team Zuckerberg peddles as long as the quarterly numbers are even half decent. Doing so is also an unlimited risk trade.

A simpler way to do it is to buy bearish put spreads or sell bearish call spreads every time the stock peaks above its 10-week exponential moving average and encounters a prior resistance level. That’s roughly 70 days on a daily chart as outlined here and roughly where the stock is as I type.

Be warned though, this is one of those trades where you may have to try three or four times before you get it “right” – meaning you and your money are well positioned for the fall I see coming.

The trick with trades like this is to keep risk levels small while the downside momentum you’re after builds.

Pile on – meaning add to positions – only when momentum really begins to build to the downside and the “Greedy *astard” Target comes into play around $175 a share or so.

It’s also important to remember that a trade like this is extremely speculative so keep risks small by using the 2% Rule we’ve talked about many times over.

At the same time, you’ll also want to remember that this is a trade millions of folks including some very well placed Wall Street money makers won’t want to see happen which means they’re going to use every trick in the book to keep prices high in an attempt to separate you from your money.

Ultimately, they’ll fail.

At that point you’re the one who could be laughing all the way to the bank.

Until next time,

Keith

4 Responses to The One FANG Stock that COULD Actually Fail (and How to Play It)

  1. Martin says:

    Hmmm…Keith, you got me to sell Facebook a year ago at $137 and I took a loss. Now it’s $197.50! So I’d be wary of fiddling with Facebook again, even using spreads. There are mysterious forces at work with this stock….I’ll just keep away, once bitten, twice shy.

    Best regards

    Martin

    • Keith says:

      Sorry about that Martin – I am sorry I let you down! Unfortunately, I do not get every recommendation right despite the best intentions.

      I share your wariness when it comes to this stock. It has the potential to be what’s called a “widowmaker” trade – a term meaning that it’s simply gonna “kill” whatever money comes into contact with it. Funny you should mention Soros because the Japanese Yen – one of his favorite trades – was a “widowmaker” years ago.

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

  2. Mike B says:

    I do not have a Facebook account for all the reasons you articulated. Unusually I agree with George Soros although I call Facebook a scourge on humanity!

    • Keith says:

      Roger that, Mike!

      I got burned and promptly shut my personal account down. Now, I’m having to deal with the wreckage of having had Facebook Messenger hacked and my friends accosted by somebody impersonating me. At least the missing Nigerian Princes didn’t get involved!!??

      Best regards and thanks for being part of the Total Wealth Family, Keith 🙂

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