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I have taken a small trading short in Facebook (FB) - Get Free Report  -- here's why

  • I believe it is highly likely that the company's advertising problems (stemming from the revelation that Russia has posted fake advertisements/information) are being understated by Facebook.
  • The Mueller investigation may uncover more issues with regard to advertising on Facebook.
  • Facebook has previously said that they have deleted millions of fake accounts around the world. Facebook has even mentioned that some days they delete as many as 1 million fake accounts. Therefore, it stands to reason that Facebook may have uncovered only a small amount of false advertisements made by Russians and others.
  • Though the amount of money being spent for advertising on Facebook is robust, at the very least an additional layer of expenses will be created.

If I am correct about these possible influences and despite the lax regulatory environment that exists today -- much like the FCC maintaining control of television and other media advertising -- Facebook and Alphabet's (GOOGL) - Get Free Report Google will likely face much more scrutiny in the months and years ahead. (More fake advertisements could be forthcoming).

This may represent a short term blow to (T)FAANG as well as the Nasdaq.

I expect the Nasdaq to underperform the other senior indices now.

Jim Cramer and the AAP team hold positions in FB and Alphabet for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB or GOOGL? Learn more now.

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At the time of publication, Kass and/or his funds were long/short XXX, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.