Every great bull market has its symbols. These symbols more often than not take the form of a publicly traded company, which stands out above all the rest. Perhaps no two companies come closer to being symbols of our present bull market than do Microsoft and Amazon.com. These companies have dominated financial headlines for the past several years and have been praised as prototypes of the "New Economy," service-oriented tech companies which promise to revolutionize the way America—and the world—does business. But the flip side of this coin is that every ending bull market (which translates into a beginning bear market) also carries with it its symbols. These symbols tend to be of a negative variety and often take the form of a major scandal within a previously respected company. Sometimes, these bear market symbols are nothing more than the tarnished and sullied symbols of the previous bull market. Every great bull market has its success stories, and Microsoft and Amazon must certainly be considered preeminent among ours. But every great bear market begins with a scandal and story of corruption within the corporate realm, and we believe Microsoft and Amazon will fill this role as well.

There is no need to enumerate the successes of either of these companies; their stories are well known. What isn't so well known, however, is the incipient story of corruption and financial turmoil that has already begun leaking from within their walls. The most recent—and startling—of these revelations comes from the research of Bill Parish of Parish & Company, a financial research firm in Portland, Oregon. According to the shocking discoveries made by Parish and his staff of accounting experts, Microsoft—through a highly illegal relationship with the federal government—does not pay federal income taxes. Quoting from a recent press release from Parish & Co., "Based upon a review of SEC filings for the quarter ending 9/30/99, the Microsoft Corporation no longer pays federal income tax on current income. Taxes now paid are from prior years that were deferred into the future….The following reconciliation supports this conclusion for the quarter ending 9/30/99 and is consistent with results for the quarter ending 12/31/99.

($ in billions )

Income Before Taxes $3.320

Adjustment ( 3.471)

Adjusted Taxable Income (. 151 billion) Since there is no taxable income, the federal tax owed is zero.

Adjustment Calculation: $1.215 billion from the cash flow statement line titled "Tax Benefit From Exercise of Stock Options" is divided by .35 or 35 percent to get the deduction for stock option wages taken in the quarter and not charged to earnings. This amount is $3.471 billion.

"Meanwhile," continues Parish, "Bill Gates is strolling the halls of Congress with the swagger of a national hero. At the same time back in Redmond his investment manager is aggressively selling his inflated Microsoft stock and making large investments in the so called traditional economy while all his media outlets, including MSNBC articulate the glories of the new economy. Even the Wall Street Journal did a major editorial last week titled, "Why now is the time to buy Microsoft." These are scenes one would expect to see in Jakarta, Indonesia, not Washington D.C." Are you beginning to smell conspiracy afoot?

Equally surprising is Parish & Co.'s finding that most of Microsoft competitors without profits are paying staggering amounts of federal income tax via stock options exercised by employees. The Federal budget has been effectively balanced on the backs of Microsoft's competitors.

Amazon.com has never earned a profit yet its employees have paid more than $300 million in federal income tax as they exercised stock options, even if the stock is not sold. This is a windfall for the government because the company can't utilize the tax deduction because Amazon.com has no profits. Microsoft is able to fully utilize its tax deductions and so it is effectively a "wash" to the IRS, the employee pays but the company takes a deduction and so the net income to the IRS is close to zero.

Parrish's upcoming book, "Microsoft's Class War on America," also highlights the alleged criminal activities of what he calls the "Gates 7." "These are the people mostly responsible, whether by accident or design, for creating this massive breakdown of our free market system," Parrish says. "This situation is responsible for destabilizing the global economic system and creating the single greatest threat to our economic prosperity as a nation."

Among the Gates 7:

Mike Brown, a former Chief Financial Officer (CFO) at Microsoft was instrumental in setting accounting standards designed to give preference to Microsoft. He was also Chairman of the Board of the NASDAQ Stock Exchange during a period in which significant financial fraud occurred in the form of price fixing NASDAQ stocks, for which investment firms later paid $1.2 billion in fines.

Bob Herbold, Microsoft's Chief Operating Officer to whom the CFO reports, is a "New Media" genius that is leading an assault on privacy designed to make the sale of privacy the number one product on the Internet. Herbold was head of advertising at Proctor and Gamble before coming to Microsoft and one only read his famous speech in 1994 to understand why privacy is such an important issue now.

The chart for Microsoft tells the whole story. Its stock has been relentlessly falling for weeks now, with no sign of a let-up on the horizon. Volume has been extremely heavy—typical of a stock in panic liquidation. It is obvious that inside holders and big money traders in this stock realize that something is very amiss within the Microsoft organization.

Amazon.com is another bull market symbol whose undoing will wobble the very foundations of the "New Economy." The online bookseller has yet to turn over a profit, and is no closer to doing so now than when it first went public. Wall Street analysts have continually praised the company, heralding it the future of online direct-to-consumer sales. One example of how the financial media act as shills for Amazon was found in the April 27 edition of the Wall Street Journal. An article headlined, "Amazon.com Beats Analysts' Estimate" would give an undiscerning reader the impression that Amazon's financial future is on a sound footing. Deeper into the article, however, it was admitted that the company suffered one of its biggest quarterly losses to date—$308.4 million compared with $61.7 million in the comparable year-ago quarter. The article asserted that the company could finally turn over a profit "sometime next year," a highly doubtful proposition to say the least.

Another sign that Amazon is struggling to meet financial obligations is the almost desperate tone of some of its latest business ventures. For example, the company recently announced its plans to enter the lawn and garden industry by selling equipment, seeds and fertilizer through its web site. Shipping for products sold—even for a half-ton lawn tractor—will be a flat $5. Shortly thereafter, the company announced it plans to enter the wine selling business. Amazon has not even become profitable at selling books online. Yet it now wants to dive into two industries it has absolutely no experience with, industries which are as far removed from book selling as east is from west. Smells like desperation to us.

When it finally becomes evident to the investing public that good ships Microsoft and Amazon are sinking, one can only imagine what the reaction will be. We predict that these two scandals-in-progress will be revealed to the public just in time for the collapse of this country's greatest bull market of all time.