Money Rehab with Nicole Lapin - Breaking News: The Largest Corporate Fraud Ever

Episode Date: February 1, 2023

Nicole catches you up on the biggest headlines of the week (so far), including the breaking story that might be the biggest corporate fraud... ever.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. It's time for some money rehab. Let's take a pulse check on the markets and demystify this week's biggest headlines so far. The first headline is breaking news, and it comes to us from industry insider Nate Anderson and his team at Hindenburg Research. Hindenburg Research is an investment group that short sells

stocks. In other words, they borrow a stock to sell and then they buy it back at a lower price and they pocket the difference. But Hindenburg Research also publishes their industry research for everyone to read. Last week, they tweeted that they had uncovered what they believe to be the largest corporate fraud in history. Mic drop. Obviously, that tweet attracted a lot of attention. And then Hindenburg Research rolled out the receipts. And they had a lot of receipts. The player in this fraud is the Adani Group,

an Indian conglomerate with a ton of subsidiaries in different industries. Hindenburg Research accused the Adani Group of stock manipulation and accounting fraud going back decades. This resulted in massive stock market losses for the Adani Group and its affiliated companies. Last week, the company lost $48 billion of its value. And this week, the founder has lost so much money that he has dropped from being the second richest man on earth to the seventh. The Adani Group denies all of Hindenburg's claims. So we'll see how this investigation goes. It will be a doozy because the story has everything. Gold bar dealers, weddings, fugitive diamond merchants, and embezzling of American aid money.

It's wild. Hindenburg Research did not undersell the scope of this story. What's important here is that the Adani Group is a massive company with a lot of power. They're involved in actual power companies, port management, airports, and technology. And they have a huge stake in the Indian economy, which is the fifth largest economy in the world. Net-net, this is a gigantic company that is an integral part of a major economy, meaning the downfall of this company could have global effects. Now, the Adani Group founder isn't the only billionaire to fall from grace. We've seen several billionaires slide down the list this year, like Elon Musk, who lost the status as the richest man in the world back in

December because of the downturn in Tesla's valuation. And of course, Sam Bankman-Fried of FTX. He was number 32 on the Forbes list of the world's wealthiest people back in October of 2021. Now the DOJ is asking for a ban on his access to personal communications because of allegations that he was attempting to influence the testimony of former employees. This filing comes as testimony against him reveals that FTX U.S. may not have been solvent at the time of the collapse, one of SBF's long-held claims. But it's not only billionaires falling this week. Used car prices are also declining from their high point during the pandemic. Now, we've covered this on the show from the perspective of potential car buyers,

but this also has big implication for used car retailers like Carvana and CarMax, both of which experienced massive growth during the used car bubble. Carvana, with its used car vending machines and the goal of becoming the Amazon of used cars, is in the most serious trouble. Its stock price is down more than 95 percent and it's in legal trouble in a couple of states. Although the company denies it, many are speculating that the company may be facing bankruptcy soon. CarMax, despite being a far more established firm, is also struggling. It reported that vehicle sales are down 21% and net income is down 86%. In other words, they're selling fewer cars for way less money. But remember, this is an industry that is still dominated by smaller dealers. So take this as a temp check more than anything else. We're also going to be able to check a lot of temperatures this week as we're in the

middle of earnings season on top of a Federal Reserve meeting. The Fed is meeting for two days this week. Generally, the expected outcome is that they will raise rates. And this should be one of the last few times they do so. And no one is expecting them to raise rates. And this should be one of the last few times they do so, and no one is expecting them to raise rates very much. If the Fed does decide to raise rates more aggressively or extend the timeline for raising rates, that would be a big shock to the market. We think we know what will happen, but honestly, no one does. So far, earnings are down about 3%, and yet the S&P 500,

Dow Jones, and Nasdaq are all up this month. I think the rest of earnings and this Fed meeting will really set the tone for a while on Wall Street. For today's tip, you can take straight to the bank. As you're looking to index funds and chill, check out index funds that are tied to sectors that do well when interest rates rise. Schwab expects financial institutions to outperform the market in the face of rising interest rates rise. Schwab expects financial institutions to outperform the market in the face of rising interest rates. So consider ETFs or index funds that track the financial sector as you're building out your all-star portfolio. But remember, never put your eggs in one basket. So if you do decide to invest in the financial sector, make sure it's part

of a diversified portfolio. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.