⚡ Cathie Wood on Tesla Stock & Market Bubbles (Supercut)

00:00
ark invest just released their latest
00:01
episode of in the know kathy wood's
00:03
monthly video series where she talks
00:04
about the stock market the economy and
00:06
advanced technologies she had a ton of
00:09
awesome insights in that episode but it
00:10
was almost 50 minutes long i recommend
00:13
watching it in full but if you're short
00:14
on time i created a super cut of the
00:17
highlights for you i'll be back after
00:19
the super cut to provide you with a
00:20
bunch of independent resources that you
00:22
can track for yourself to see whether
00:24
cathy woods ideas are coming true over
00:26
time speaking of time your time is
00:29
valuable so time stamps are enabled for
00:30
your convenience and i'll see you after
00:33
the super cut during the coronavirus
00:35
crisis when it hit
00:38
it was clear to me that the headlines
00:40
that people were reading generally both
00:42
investors and the general public were
00:44
not capturing what was really going on
00:48
in the economy we believe that
00:50
innovation is in deep value territory we
00:54
believe that kovid 19 the coronavirus
00:58
crisis
00:59
accelerated the shift towards the
01:02
innovation platforms around which we
01:04
have based all of our research i do want
01:07
you to know that
01:10
of course we've been through a very
01:11
difficult time since the
01:14
uh significant rotation from growth into
01:17
value started
01:19
nearly a year ago in mid-february
01:22
i want you to know that we're in there
01:25
with you we're all in and my conviction
01:29
uh couldn't be higher
01:31
uh that the innovation that has been
01:35
evolving and was accelerated coming out
01:38
of the coronavirus crisis is unstoppable
01:41
and the convergence uh between and among
01:44
the 14 different technologies that we
01:47
are researching that they are on that
01:50
convergence is underway now and is and
01:52
is causing and will continue to cause
01:54
explosive growth they are going to cause
01:56
a lot of problems for the underlying
01:59
economy the traditional world order what
02:02
has happened
02:03
is in the early stages of the
02:06
coronavirus when i was doing those
02:07
videos
02:09
we had algorithms and quantitative
02:12
strategies focused on just a few
02:14
variables and they were at that time
02:18
cash burn
02:20
and
02:21
cash cushion
02:22
and a lot of our stocks did not have big
02:26
cash cushions and were burning cash
02:28
especially in the genomic space they
02:30
were taken down by 75
02:33
many of them in a month
02:36
just in a month three weeks to a month
02:38
and of course that was the wrong answer
02:40
the algorithms got it wrong and that
02:43
there was a massive head fake
02:45
because of course genomics was a big
02:48
part of the solution to a problem we
02:51
were facing in the coronavirus since
02:54
february as this
02:56
rotation into value from growth really
03:00
accelerated these same algorithms
03:03
have had good success with this strategy
03:06
uh they've been focused on inflation
03:09
inflation fears interest rates and
03:12
valuations and they have likened what
03:15
we're going through right now to the
03:18
tech and telecom bubble
03:19
and the bust because the valuations
03:23
that people chased were simply based on
03:26
eyeballs that might materialize and
03:28
never did materialize we are nowhere
03:31
near that situation now
03:33
uh the dreams back then so the internet
03:37
was quite transformative and led to the
03:40
cloud and artificial intelligence
03:43
uh
03:44
we are living in the reality that that
03:47
dream started
03:48
and uh this reality has companies like
03:52
teledoc and zoom just to give you a
03:55
sense of the contrast here
03:57
you know teledoc has about 2 billion
04:01
2 billion in sales its revenues have
04:04
gone up four-fold uh since the beginning
04:08
of the corona virus
04:10
zoom's revenue
04:13
one year ago
04:14
fourth quarter
04:16
was up six and a half fold
04:20
since the beginning of the coronavirus
04:23
solid revenues
04:25
uh growth continuing from very
04:28
tough comparisons
04:30
and we've got two companies here that
04:32
are being dismissed as stay-at-home
04:35
stocks that
04:36
are going to fall back to earth
04:39
we believe that the dismissal of these
04:42
stocks is quite misplaced and suggests
04:46
that
04:47
analysts or investors
04:49
are not doing their homework what has
04:51
riled the market
04:54
in the last week or so
04:56
is uh fed minutes being released
04:59
suggesting that the fed is going to
05:01
become more aggressive
05:02
at uh raising interest rates perhaps
05:05
sooner than many expected maybe in the
05:08
march time frame and it does not want to
05:11
be blamed uh for inflation being
05:14
sustained and and certainly not moving
05:18
out of control we think that some of the
05:21
economic statistics that i'm going to
05:23
share with you in a bit the fed knows
05:25
very well
05:26
and those statistics suggest
05:29
that inflation is indeed transitory
05:32
now
05:33
what we've been trying to size up for
05:36
the last few months is where is real
05:39
demand now that all of these employees
05:43
are coming back to work we're looking at
05:45
other statistics that show a divergence
05:49
from that one of them the most important
05:51
is consumer sentiment consumer sentiment
05:55
is down to levels that we last saw at
05:58
the depth of the coronavirus
06:01
both in november and december now that's
06:04
a very important part of the time of the
06:07
year for the consumer to be feeling
06:10
unconfident
06:11
because it's the biggest selling season
06:14
of the year the other is again
06:16
reflecting on third quarter gdp
06:19
statistics in the third quarter of last
06:23
year real gdp was up 2.3 percent
06:27
it was a big disappointment relative to
06:30
expectations but what the headlines did
06:32
not feature and i and still are not
06:35
featuring is that practically all of
06:39
that growth
06:41
went into inventories it wasn't sold
06:44
real final sales were were up a tenth or
06:47
maybe two-tenths this is something i
06:49
don't think the headlines have captured
06:52
you might be surprised uh to hear it as
06:55
well then we get to autos i think this
06:58
is the most fascinating part of what's
07:00
going on in the economy right now the
07:03
mannheim used car index has been
07:06
screaming i think uh the prices
07:09
of used cars at their peak had increased
07:13
on a year-over-year basis something like
07:15
60
07:16
the bubble was in used cars and that it
07:19
might be bursting new auto sales peaked
07:23
in
07:24
april at
07:26
18.25 million units now when we got to
07:29
october
07:30
and uh the auto oems were talking on
07:35
earnings reports each one of them
07:38
including elon musk was saying okay the
07:40
chip shortage is beginning to alleviate
07:43
now they have been blaming the decline
07:45
in sales because it started in april
07:48
and it was cl declining declined to 13
07:50
million units from 18 and a quarter uh
07:53
chips were the missing link okay they're
07:56
starting to be replenished november
08:00
12.86
08:02
december we just got this number
08:04
12.44
08:06
meanwhile you've got electric vehicle
08:08
sales up near nearly a hundred percent
08:10
at an annual rate what's going on here
08:12
well it could be a combination of
08:14
consumer sentiment not being consumer
08:16
not being happy about what's going on
08:19
and
08:20
a
08:21
consumer preference shift
08:23
that is why at the ces show the consumer
08:26
electronics show
08:27
you heard these auto
08:30
oems uh talking more about uh electric
08:33
vehicles of course it was the uh
08:35
electronic show and we saw that ford's
08:39
f-150 lightning they were going to have
08:41
to double production given all of the
08:43
demand well what they don't tell you
08:46
during those
08:48
appearances at ces and so forth is that
08:51
electric vehicles make up maybe two to
08:54
three percent of their sales
08:56
and that 97
08:58
of their revenue bases gas powered
09:01
vehicles and it's probably 90 percent
09:04
plus of their production now
09:06
if there is the combination
09:08
of the consumer turning off
09:11
not wanting to spend as much money
09:13
certainly not on big ticket items and a
09:16
preference shift if they're going to
09:18
spend they're going to spend on electric
09:20
then these oems have an issue we think
09:23
we're going to hear more about it
09:24
in the quarterly reports
09:27
now i look at the i look at the
09:29
performance of stocks like gm and ford
09:33
they soared on those electric vehicle
09:36
announcements think about that that's
09:39
ridiculous it's only two percent of
09:41
their sales and what if the other
09:44
98 or so forth are on their way out as
09:48
the consumer preference shifts toward
09:52
electric they have problems now on to
09:55
market signals the rotation is still
09:58
towards value it is hurting growth we
10:01
think it's long in the tooth we think
10:02
it's going to end but it hasn't ended
10:04
yet in the crypto market we're seeing a
10:07
correction
10:08
they are starting to succumb to what
10:11
we're seeing in the equity market which
10:14
is
10:14
this
10:15
strike against technology
10:18
uh growth innovation we we think that's
10:21
going to be uh short-lived and giving
10:24
you a sense
10:26
of
10:26
where the bubble might be in this market
10:30
it is not
10:31
in innovation stocks they've been cut in
10:34
half many of them some by 75
10:37
but listen to this i i gave you the the
10:40
story about ford reporting that it would
10:43
have to double its electric vehicle
10:45
production of the f-150 lightning
10:48
and this the stock just taking off uh
10:52
not paying any attention to the uh auto
10:55
statistics i just mentioned well when i
10:59
think of what could happen in that space
11:01
and i see these stocks
11:03
uh ramping on sales that mean nothing to
11:07
these companies uh in terms of their
11:10
earnings shall we say a lot
11:12
right now in fact they need to invest a
11:15
lot more in electric to make it happen
11:18
and to move the needle in these
11:20
companies but what if we're right and
11:23
the there is not a 20
11:25
increase in sales maybe
11:27
sales are flat-ish year to year that
11:30
would
11:31
put them at roughly 15 million units
11:36
and they'd probably have to start
11:38
cutting prices if we're right on the
11:40
used car market
11:42
and the pricing there
11:44
which means they're probably going to be
11:47
facing some credit issues since they uh
11:51
they're hugely leveraged to the credit
11:54
that people take out on their autos and
11:57
as prices go down residual values go
12:00
down you know auto credit was the best
12:03
performing credit in 0-809 and so
12:05
there's a lot of complacency in that
12:08
market so we think that complacency is
12:11
misplaced and that the auto credits out
12:14
there
12:14
could become a mess and i wouldn't be
12:18
surprised
12:19
if at least one of the companies loses
12:22
money next year which would be most
12:24
unexpected if it loses money what is
12:27
that valuation
12:29
where are the crazy valuations now
12:32
are they in our stocks
12:34
now that
12:35
zoom is down to 33 or 35 times this
12:40
year's earnings
12:41
or is it in an auto stock where there
12:45
might be losses and what's that p e
12:48
ratio
12:49
that's infinity
12:51
that's where the bubble is and i think
12:52
you're going to see a lot more cases in
12:54
point
12:56
as this year moves along
12:58
and the innovation that we see
13:02
evolving
13:03
so rapidly dna sequencing transforming
13:07
healthcare
13:08
robotics solving the labor shortage
13:11
problem we're having
13:13
energy storage the consumer preference
13:15
towards electric artificial intelligence
13:18
which is the glue that is uh helping all
13:21
of these technologies converge and the
13:24
last one blockchain technology we think
13:27
that we're in a period of innovation
13:30
that was the dream
13:32
in the late 90s but those those
13:34
companies were vaporware they were based
13:37
on nothing but eyeballs we have real
13:40
revenues we have incredible growth rates
13:43
and if we're right and the economy has
13:46
an inventory problem then our growth
13:49
rates are going to look far superior to
13:53
anything you'd find in the value space
13:56
and
13:57
we are really looking forward to that
13:59
but i do think as we see these earnings
14:01
reports coming in and the guidance for
14:03
the first quarter and this fessing up
14:06
out there into what's really going on
14:09
with inventories
14:10
uh that we're going to see the turn
14:13
sooner rather than later wow what an
14:16
important episode there are a ton of
14:18
valuable indicators that kathy wood is
14:20
using to conclude that growth stocks are
14:22
in deep value territory and that a
14:23
bubble is forming in value stocks let me
14:26
show you what data sources you can track
14:28
completely independent from arkhanvest
14:30
to stay informed and come to your own
14:32
conclusions as always all of my sources
14:34
can be found in the description below
14:37
kathy wood mentioned that one of the
14:38
most important indicators is consumer
14:40
sentiment especially around the holidays
14:42
when people tend to spend a lot more
14:44
money on goods one great place to track
14:46
consumer sentiment is through the
14:48
university of michigan's surveys of
14:50
consumers consumer sentiment and
14:52
expectations in december are all down by
14:54
large amounts year over year which means
14:56
people are doing less shopping consumer
14:59
sentiment is a leading indicator for
15:01
demand when demand falls prices of
15:03
supply should fall to meet it over time
15:05
so tracking consumer sentiment is a
15:07
great way to get one data point on the
15:09
future changes in price inflation the
15:12
federal reserve is reacting to changes
15:14
in inflation and one place you can see
15:16
that reaction directly is in the federal
15:18
open market committee's meeting minutes
15:20
i kind of treat these meetings as
15:22
earning calls but for the entire economy
15:24
there are eight fomc meetings this year
15:26
one about every seven weeks so setting a
15:29
calendar reminder and then checking
15:31
their minutes for talk of interest rate
15:32
increases is a great way to stay on top
15:34
of what's going on directly from the
15:36
source without media bias as of their
15:39
december 15th meeting the expectation
15:41
for the first increase in the federal
15:43
funds rate moved from the first quarter
15:45
of 2023 to june of 2022 meaning they're
15:48
thinking about raising interest rates
15:50
about nine months sooner than was
15:51
expected by the market before that
15:53
meeting the federal reserve is reacting
15:55
to changes in the consumer price index
15:58
or cpi so keeping track of that is a
16:00
great way to anticipate what the fed
16:02
might say and do in the future the best
16:05
source for the cpi is the u.s bureau of
16:07
labor statistics their website shows the
16:09
cpi broken down by different categories
16:11
of goods and services when kathy wood
16:13
talks about the prices of certain items
16:15
forming a bubble you can see them for
16:17
yourself here for example here's
16:19
inflation for all items in november at
16:22
6.8 percent like everyone's been saying
16:24
now check out how high inflation was for
16:26
new vehicles where kathy woods said that
16:28
the bubble is forming 11.1 percent
16:31
inflation on new vehicles now check out
16:33
the inflation of gasoline talk about a
16:36
volatile asset no pun intended this
16:38
volatility and high inflation rate on
16:41
gas could be partly responsible for
16:43
consumers wanting to shift towards
16:45
electric vehicles and the us bureau of
16:47
labor statistics is how i like to keep
16:49
track of that price and a part of why i
16:51
covered tesla so much so let's switch to
16:54
tesla and its competitors fred uses data
16:57
from the u.s bureau of economic analysis
16:59
to track total vehicle sales if we zoom
17:02
into the data since the pandemic we can
17:04
see that vehicle sales peaked at about
17:05
18.8 million units in april and are now
17:08
at about 13.3 million units which is a
17:11
whopping 40 decrease at the same time
17:14
electric vehicle sales continue to break
17:16
records up double or even triple digits
17:18
year over year so the last thing we
17:21
should track is which car companies have
17:23
the majority of their sales coming from
17:25
electric vehicles since the data appears
17:27
to suggest that's where the world is
17:28
heading for example ford's battery
17:31
electric vehicle sales account for
17:32
roughly two and a half to three and a
17:34
half percent of its total volume today
17:37
by 2025 that number is expected to be 11
17:40
and a half percent and by about 2030
17:42
one-third of their total sales volume
17:44
should be electric even then there are
17:46
big differences between the products
17:48
coming from tesla and from ford like
17:50
their battery technologies software
17:52
options and even their charging
17:54
infrastructure clean technica is a great
17:56
place to get electrical vehicle sales
17:58
data and compare it to each brand's
18:00
overall sales data to see the
18:02
percentages that come from evs for each
18:04
brand quarter over quarter their sales
18:07
data roundup for all of 2021 should be
18:09
released in the next few weeks hopefully
18:11
this supercut helped you catch up on
18:13
arkhanvest's latest episode of in the
18:15
know with kathy wood as well as provided
18:17
some independent resources for you to
18:19
track to stay ahead of the game my goal
18:21
with these supercuts is to add value by
18:23
saving you time and gathering all of the
18:25
relevant resources in one place and i'll
18:27
save my own opinions and commentary for
18:29
a separate episode if you find that
18:31
valuable as an investor let me know by
18:33
liking this video and subscribing to the
18:35
channel with all notifications turned on
18:37
that's a great way to invest in the
18:39
channel that invests in you so stay long
18:42
stay strong and thanks for watching
18:44
until next time this is ticker symbol
18:46
you my name is alex reminding you that
18:48
the best investment you can make
18:50
is in you