Cathie Wood: Time To Sell Stocks?

kathy wood is the number one hotshot fund manager right now managing over 50 billion dollars of investor money although last year was a great year for the ark funds 2021 so far has been a little bit turbulent let's take the rk flagship fund for example so the year started excellent and the funds shot up over 25 we then had a big sell-off and the funds came crashing down almost 30 and now so far this year the funds are still down over 1 so the question is is now the time to be selling and taking profits or is now just a good buying opportunity well that is what we're going to be answering in this video kathy wood does have a very unique and strong vision for the company and this is built around what she calls the five major innovation platforms so this is their impact of innovation going all the way back to the 1780s and you can see we had the invention of the steam engine followed by railways followed by the internal combustion engine then in the 1900s we had huge innovation of the telephone automobile and electricity then nothing for about 80 years before computers came followed by the internet and now we have these five huge innovation platforms all happening at once blockchain technology genome sequencing robotics artificial intelligence and energy storage but the arc funds have struggled so far this year and even elon musk has reached out to kathy with concerns that the stock market is looking a little bit overvalued so in this video i do have some clips from kathy wood and also we'll be covering four main things first up what exactly did elon musk say to kathy and what was her response there's an update to the buffet indicator which is flashing some dangerous red signals we'll then look at kathy wood's bold prediction for bonds and then finish by answering the question is now the time to buy or sell as always if you do find anything useful in the video be sure to drop a like and that's always very much appreciated okay so first up elon musk reached out to kathy wood last week as he had some concerns about the stock market and here is what he said what do you think of the unusually high ratio of the s p market cap to gdp so with those that are not familiar with the ratio of stock market to gdp it's known as the buffett indicator as warren buffett had said that it's probably the best measure that we have to know whether the stock market is overvalued or undervalued and basically if you take up the value of all the companies in the stock market you then divide it by gdp which is gross domestic product it then gives you a percentage and this is what elon musk was questioning let's take a look so this is the buffet indicator that he was referring to and this goes back to 1950 and as mentioned it gives us a percentage now historically it's been going between this 50 percent and 100 range and the times that it's broken past a hundred percent is when we've had a big stock market crash it broke it again in 2008 we had another stock market crash and this is the unusually high ratio he was referring to it's now broke past over 200 now before we get into the response by kathy wood i too can offer a simple explanation as to why it might be so high so think about it a large part of gdp is all the products and services that are being sold and as we are in the midst of a global pandemic people are not spending money as they normally would be now of course this is going to lower gdp and by default it's going to increase this ratio and i think when we get back to normal this indicator will begin to come back down now this is not to say that the indicator won't still be really high because i think it will but for me this does answer the question as why it is so high anyway that's my two cents worth let's now listen to what kathy wood had to say and her response was very interesting check it out elon musk uh responded to us and uh asked uh the question about i guess it's the warren buffett indicator i didn't know it was uh called that uh but it is uh a ratio uh market the the equity market cap in the u.s uh through gdp which is uh which is as high as it's been really um in with the exception of the tekken telecom bubble but if you if we go back uh about a hundred years this is a about as high as that and um so we've um we've done a lot of research on uh not just the past hundred years but uh prior to that as well uh because the past hundred years and especially post world war ii where we have the best statistics um they've been good guides so you know the the highs and lows the bases and so forth but we're in a new new era and it's much more like the late 1800s and the early 1900s and if you look at that same ratio back there um it's much higher much higher and i think one of the reasons for this is the denominator gdp is made up of both real growth and inflation and if we're right and these five major platforms 14 technologies are all deflationary in nature and they're going to become a bigger part of the economy i think electric vehicles going from 2.2 million uh sales globally last year to 40 million in five years and we think the growth in the us is going to be as fast as that uh 82 uh compounded at an annual rate um if that's right and these major deflationary forces begin to move the gdp needle it means the denominator is moving down all other things equal display deflation holds the denominator down relative to the numerator and uh and that means the ratio is going up so i think you do have to go back to the last time we saw major innovation platforms evolve at the same time there were only three back then telephone electricity and automobile there are five now dna sequencing robotics energy storage artificial intelligence blockchain technology and they are going to deliver profound changes in the global economy anyway the deflationary forces of five innovation platforms uh are going to be powerful and then add on top of that the deflationary forces associated with companies that have not done the right thing over the last 20 years uh those two are going to be tugging at pdp and i think pushing that ratio higher so she does make a very interesting point now everyone looking at the buffet indicator are only checking it for say the last 50 years but kathy wood in the team went all the way back to the late 1800s early 1900s and they found that the indicator was even higher than it is today and she mentioned with these five big innovation platforms evolving blockchain genomics robotics ai energy storage and if she is right then the buffet indicator will be going even higher now you have to give a credit for her analysis no one else has this line of thinking okay so moving on she now has some really interesting points about the bond market and as there is more money in bonds than any other asset class excluding forex even if you don't invest in bonds right now they are still important and here's why and it's because the bond market is a massive market we are working in the trillions of dollars and this is the size of some of the global markets we have bonds stocks gold crypto and silver and if you think the stock market was big look at the size of the global bond market and if there's problems in the bond market you could start seeing huge capital flows into other asset classes and this is why it's important to follow what's happening with bonds and here we have the 10-year treasury yield so this is how much money you would make if you would lend your money to the government for 10 years and you can see going back all the way to 1880 historically you could get a risk-free return of close to three to five percent now bonds went through an awesome period where you could get over 10 even over 15 risk-free return but for the last 20 years the bond yield has been falling and it's now around 1.67 percent the question is will bonds make a comeback and when you think about it if we're right on this deflation call the long-term treasury yield probably is not going to go much above two and a half or three percent if we're right and that suggests that the valuation of the market kathy wood does not think the long-term yield is going to rise much past two and a half percent so this is basically saying that getting a great risk-free return from bonds is now over at least in the short term and if inflation picks up we could then see a large amount of money begin flowing out of bonds and into other asset classes so very interesting stuff okay and to finish up with all the volatility going on in the markets especially with the arc etfs is this the time to be selling and taking profits or is this a great buying opportunity is kathy wood herself panicking let's find out and so as i mentioned uh last time around for those of you who have been concerned about the volatility in in the market the volatility in our strategies all that did from our point of view is give us bargain prices so that we started once again to concentrate towards our highest conviction names uh and um and got some great opportunities as uh as the rotation into value was taking place it was taking place out of names like ours and uh we will use those opportunities every every time because our price targets are not going to change these long-term uh price targets are based on well-defined cost curve declines and uh and the price of price elasticity of demand estimates uh if we get a change on either one of those then of course we'll adjust but a volatile market is not going to change anything in our five-year targets so uh we're very excited about the equity market and and also innovation we love the fact that um we're engaging on twitter with uh elon musk and uh and lots of other uh executives and investors and innovators and individuals and we love getting those sorts of questions that uh we need to uh stay on our toes that's what we intend to do and uh and so with that i wish you a very happy green weekend so for kathy wood and the team all this volatility did was create some bargain prices on their largest holdings so this was more of an opportunity to buy in at lower prices than it was anything to worry about they work off a five-year plan and fundamentally nothing had actually changed in fact she has said that they are very excited about the equity market right now so in summary bringing all this together kathy wood doesn't see the buffet indicator as a major concern right now in fact they went back all the way to the early 1900s and apparently it was much higher than it is today she doesn't see bonds making a major comeback which means there could be some major outflows and into other asset classes and the volatility of q1 didn't actually change anything for her and the team in fact they saw it as a great buying opportunity so there you are guys hope you found this useful in fact just one favor to ask if you did find anything useful in the video if you wouldn't mind taking two seconds just to drop a like and a big thank you to everyone who does you guys are awesome if you haven't yet subscribed to the channel i invite you to click below and join us i do have some great videos coming up that you don't want to miss okay cheers guys thanks for watching and i'll see you in the next video bye for now [Music] you

Channel: Investing Made Simple - Nathan Sloan

Views: 139,403

Keywords: Cathie Wood, Cathie Wood ark invest, ark invest, arkk, ark etfs, Cathie Wood stocks, stock market, stocks, bonds

Id: cx8YzO-Z5kE

Length: 14min 20sec (860 seconds)

Published: Mon Apr 12 2021