All is Well! FAANG Stocks Hit All Times High as the Economy Collapses

The economy is in shamble with predictions of 20%+ drop in Q2 GDP and so far 22 million people filing for unemployment in the US in the last four weeks, but the market acts as if nothing happened with the NASDAQ positive for the year.

A lot of it as to do with the various government stimulus, FED balance sheet going through the roof, as well as more demand from companies providing services for the many "work from home" (WFH) workers due to lockdowns.

But if we look into the details it's not that pretty, as FAANG stocks are responsible for most of the rise. In other words, it's not a broad market rally, and many NASDAQ stocks are still way down.

From a historical perspective, most bear markets will have a bear market rally, as shown from the S&P 500 chart below between 1998 and 2020. Source: NorthmanTrader.

You could always say "but Dark Horse, 2020 won't be like the great depression, and instead, it's just like 1987, we had the "best economy ever" and it's all up from here after everybody goes back to work + FED put!". To that argument, I'd answer the market was not overextended in 1987 as shown by the market cap to GDP ratio aka "buffer indicator".

Before the crash in 1987, the market cap to GDP was just 64%, and now it's around 130% before dismissal GDP numbers are announced meaning it should be above the previous record soon.

I'm a big believer in mean reversion of things like market cap to GDP and PER ratio / CAPE ratio. We previously wrote how many markets were overvalued including the US markets, and GMO just released their quarterly update with their expectations of yearly returns for various markets over a 7-year period.

That means large US stocks may lose around 1.5% a year over the next seven years, not a nice proposition especially when considering those numbers were after the correction in March 2020. Also note bonds don't look to be a good place to hide either, but emerging value stocks have some good prospects, and we previously mentioned that Chinese commodity producers may be a place to look for investment opportunities.

I'd still stay very prudent here as there are many risks around. We are quite surprised people expect a vaccine by 12 to 18 months, as we would like to remind our readers that some virus-induced diseases don't have a vaccine, think AIDS or dengue fever. The latter is even scarier because you don't develop immunity, and instead, the risk of death is greater the second time, and even more the third time. There have been reports that released COVID-19 patients have contracted the disease again, so herd immunity is not even a given, but so far there's no indication that the second infection is nastier like for dengue fever.

Stay safe! We live in scary times for our health, finances, and freedom from governments.

Fraudulent Company Warning: WELLINGTON YORK PARTNERS PTE. LTD.

A coupled of months ago we wrote about AirBnB and Virgin Hyperloop One Pre-IPO fraud where victims would receive cold calls from native English-speaking, apparently financially savvy "financial investors" proposing them to invest in pre-IPO offerings from popular companies that had yet to be listed in the stock market.

They work for fake companies and instead ask victims to invest through escrow companies "for your safety". We previously mentioned Kaloca Inc (USA) and Vipco Holdings (Singapore) used by Van Gossum Consult, Brookfield Investment Funds Plc, and others, but we were informed about another company helping scammers: WELLINGTON YORK PARTNERS PTE. LTD
.

Victims who contacted us receiving an invoice with the following details:

WELLINGTON YORK PARTNERS PTE. LTD.
68 Circular Rd.,
Suite 02‐01,
Singapore 049422
Account Number: 348 903 0630
Bank Name: UNITED OVERSEAS BANK LIMITED
Bank Address: UOB Plaza
80 Raffles Place,
Singapore 048624
Swift Code: UOVBSGSG

Make sure not to make any payment to this company, and if you've received an invoice you can contact the police, and/or the Commercial Affairs Department in Singapore to report the company.

The company has a website which we will not publicize here, but while they claim to operate since 1986, they only thought of registering the website in 2018...

Since the company is registered in Singapore, there's a searchable business registry, and we can see the company was only incorporated on the 7th of June 2019.

Fraud Warning - COVID-19 Bank Scams

In February 2020, we wrote about one particular type of financial fraud, namely pre-IPO offering for well-known companies like Virgin Hyperloop One and AirBnB, where the scammer call victims offering investment opportunities.

But just like politicians, scammers never let a crisis go to waster, and we've received information from Standard Chartered Bank so some are trying to exploit COVID-19 pandemic to prey on victims.

Here's the email from the bank:


Protect your business from COVID-19 bank scams

Criminals are exploiting the COVID-19 pandemic to target and scam bank clients. They are using social engineering techniques (Phishing and Vishing) to hack or spoof business email accounts to fool potential victims into making fraudulent payments or to gain access to online banking authentication credentials for financial gain.

Please be extra vigilant and heed the following advice:

• Do not disclose your S2B credentials, VASCO OTP or account details to anyone, as this may compromise the security of your account.
• If you receive any suspicious emails, do not click on links or attachments until you have validated the source. Please ensure that you access your bank account only through our official channels.
• If you receive any suspicious text messages or phone calls, do not respond directly, please verify if the message or the caller is legitimate. 
• Validate any new bank account details directly with your suppliers / clients. If you notice unauthorised transactions appearing in your account, please report to us immediately.

Thank you for banking with us.