I have taken a small trading short in Facebook (FB)  -- 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) 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.

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