Covid-19

[holymage]

@Holymage My portfolio is mainly FAANG and SaaS type stock, lol. I also own Tesla. Interesting perspective, because I disagree with much of them.

1. High valuation ("bubble companies") doesn't cause bankruptcy. In fact high valuation reduces the risk of bankruptcy because it's easier for the company to raise cash by selling equity (which Tesla did at $7-800) exactly a month ago. That said, a sharp downturn in the economy, and prolonged forced social distancing policy might bankrupt them, so Tesla is indeed facing some headwinds.

2. I don't see FAANG as very high valuation in general (Google now has trailing PE of 22, growing at high teens), with very strong balance sheet and cash position. Forced social distancing is actually a tailwind as internet traffic exploded the past few weeks around the world (which is cancelled out by a downturn in the economy in general). They are some of the safest bets in the face of this crisis.

Just my 2c 

Wildreamz,

Obviously high valuation doesn't cause bankruptcies. The bubble companies which I meant, are those that have cash flow issues and/or flaw business model, but are artificially propped up by low interest rates and investors euphoria (zombie companies). Another company came to mind, Blue Apron. The window for raising capital has already been closed for weeks, and all assets classes have been selling off for cash, even including traditional safe havens like gold and US Treasuries. Do you seriously think that Tesla is able to raise capital now? You must be kidding me.

US corporations are in record debt, and due to quarantines and a fear of being infected, there is a steep drop to the flow of money. With revenue freezed, expenses to be maintained, do you still think companies have sufficient cash flow to survive, much less heavily indebted companies. There is a reason why the Russell 2000 dropped 40% compared to the 30% drop in S&P. Unemployment claims has already started rising in various states.

Google has a strong balance sheet for sure. No dispute about that. But Google and Facebook are predominantly in the advertisement industry, with majority of market share. Do you think businesses that are suffering amid declining consumer demand, will still advertise? Would you continue to advertise if you own a small business and is bleeding cash? This is different from 2008 when Google has a tiny share of the advertising space. Your thinking is a typical, and simple extrapolation and assuming revenue will keep growing in a linear manner, and there will never be a recession. 
More likely than not, Google's earnings will shrink in the impending recession (if we are not already in one), your "low/moderate" PE of 22 will just grow larger as earnings drop. Maybe the PE will decrease, as the share price falls faster. Same applies for the other FAANG.

Just my 2c.
When the time comes, I will definitely revisit this post again, let's see what comes to reality 

PS: Tesla raising capital, either indicates that Elon Musk is a great capital allocator or Tesla has serious cash flow issues. I am betting on the latter.

Good luck.