Broadly speaking, in the market, i'm a little skittish yeah tech stocks in the toilet. Now i'm kind of positioning myself to hedge myself in this situation. If there's anybody that has benefited from the tech boom, it's got to be chamath palihapatiya. Over the past nine years, chamath averaged a return of 33 percent per year by investing in growing tech giants.

However, chamath recently took a sudden change of opinion. Chamath believes that over the next couple of years, the entire stock market is going to experience turmoil, especially tech companies. He now has a new game plan that he believes will outperform the market. This video will go in depth on chamat's macroeconomic outlook and how he's navigating his investments to protect his portfolio supply chains worldwide are failing to meet the recovering consumer demand.

Despite the fact that the economy is rebounding, a substantial number of people are not returning to work. Total non-farm job openings have increased substantially over the past 12 months. Non-Farm job openings represent the number of jobs open for all workers, except for farmers. Total non-farm job openings have increased some 6.5 million in august of 2020 to 10.6 million in august of 2021..

Many investors and economists have pointed to these supply chain issues as temporary fed chairman jerome powell thinks that wages are not rising at a pace that is excessive. As demonstrated by powell's inflation dashboard, the employment cost index is only increasing at roughly 3 percent per year, which is not much compared to the rate of increase in the 1990s and 2000s kathy wood has also publicly stated that cyclical deflation is coming corporate leaders. Think the same too, as amd ceo lisa sue, sees the chip shortage ending next year. Chamath strongly disagrees with everyone.

He believes that supply chain issues are here to stay and that inflation is about to take off. I think that most people are under the impression that these are short-term kind of contractions and expansions, and that this is just the thing that needs to get worked through the system as we readjust to a post, covert world blah blah. I think it's different and the reason i think it's different is, if you just look at one thing and one thing only, which is that we have a massive labor shortage in america and there is an incredible stat that i saw, which was the average hourly earnings Of non-manager people in hospitality and travel and the average salary the mean salary was around 20, some odd dollars an hour, and it's now 33 bucks an hour. And so what that to me says is that we are going through a really sustained period, where you cannot get people to do the work that needs to get done.

While i couldn't find the exact statistic that chamath was looking at, it's certainly true that wages are increasing dramatically for workers in leisure and hospitality. The average hourly salary for employees and leisure and hospitality has increased from 16.85 dollars to 18.58. Over the past 12 months, increased wages sound great, but wage growth and supply chain issues have also been inflating consumer prices by a similar margin, which is clearly demonstrated by the consumer price index. Contrary to the fed's expectations, consumer prices have continued to increase faster and faster.

This was caused not just from the labor shortage, but also from increasing prices in raw materials. Chamath believes that both of these factors will cause inflation to sustain in the short to medium term. There's people right so labor capital. I just think it's getting more and more expensive to get folks to do work and then there's the raw materials that you use to make anything and everything that i see is that stuff is going bananas.

And so i put these two things together and i'm like. I think this stuff is here to stay um, i'm really kind of a little bit of a you know, and i and i had not worried and you you can see in every episode before this. I was always consistently like. There is no inflation.

You can fade the inflation trade and now i'm kind of positioning myself to uh hedge myself in this situation, as we covered earlier in this video, the federal reserve is adamant about inflation being transitory. The vast majority of fed officials do not plan to increase interest rates until 2023.. The european central bank also does not want to raise rates either as they plan to wait until 2023 to increase rates. This might seem fine on the surface, but other countries are not on the same page.

Many other countries are experiencing even higher levels of inflation which may carry over to the us dollar and euro because of increased inflation worldwide. Central banks outside of the u.s and europe are beginning to raise interest rates which could lead to major issues in the global economy. Central bankers around the world have raised rates. The only place that hasn't gone up is europe ecb and the united states of federal reserve.

So and let's be honest, you know europe and the united states we absorb labor and materials from all around the world. Right we are the net importers. We are the net ultimate buyers of last resort of all of these things, and so, if you're, seeing inflation in those other, you know supply-driven economies. They are going to come on shore they're going to hit us in the face.

I think prices are going up. Chamath believes that the u.s economy will experience stagflation, which is when there is high inflation and high unemployment. At the same time, stagflation implies that the economy will suffer while prices are still increasing. A stagflationary period is the worst for central banks like the federal reserve, because any move has devastating consequences.

For instance, if the fed raises interest rates, then the economy will crash. However, if the fed keeps interest rates at low levels, then inflation will accelerate. Even more stagflation is one of the worst situations to be in, and that's why chamath is quickly preparing for the possibility of stagflation. This isn't the first time that this has happened before and it may just occur again back in the 1970s president lyndon johnson spent enormous amounts of money on the great society and the vietnam war.

After richard nixon was inaugurated. He inherited a recession and spent large amounts of money, leading inflation to reach double-digit levels in the late 70s and early 80s, the new fed chair paul volcker, increased interest rates at the cost of the economy, ultimately bringing inflation under control, as demonstrated by this graph inflation And unemployment were rampant during the 1970s, while the gdp growth could not keep up. Chamath believes that we may see stagflation just like the 1970s. I think the labor shortage is going to get worse, not better.

I think we're going to have to pay people more to get out of it. I think prices are going up, input costs are going up, energy costs are going up, so this is it. I think i think that probably the fed and the ecb are really raising this time next year, they're, probably in a really tighter posture. I don't think it's a short-term blip and i think that we are in a period that will resemble the late 70s.

We now know that stagflation may occur, but what can investors do to hedge themselves against this risk? First of all, we have to answer the question of what not to do in an inflationary environment. Tech stocks that are currently unprofitable will likely have their losses grow. Even more, during times of inflation on the flip side, businesses that are already profitable will be able to increase their profits from price bumps. Chamath believes that there are three attributes in particular that are worth looking for during times of high inflation, i'm very concerned about medium-term inflation and so in an inflationary environment.

In my very simplistic view of the world. I want to own three things: hyper growth, because hyper growth can always outrun inflation. Think of that, as like companies that are growing 50 plus percent a year, it's incredible growth right then i want to own cash generative assets. Think of that, it's, like you know a great example is like a mining stock.

I know that sounds crazy, but it's pretty incredible and then i want to own non-correlated assets. Bitcoin solana dso a lot of the d5 protocols, because it's a great counter-intuitive hedge against all of this stuff chamath is allocating his portfolio in hyper growth companies, cash flow, generative assets and cryptocurrencies. While i agree with chamath on the last two groups, which are cash flow, generative assets and cryptocurrencies, there are some major flaws in the first group of stocks which are hyper growth companies. High inflation would actually be detrimental to hyper growth stocks, because investors would want cash right away rather than future cash flow growth.

This is because, in an inflationary environment, future cash is worth substantially less than present day cash. Another reason why hyper growth would not fare well. In inflation is because of the way numbers compound if a high revenue growth rate is discounted by a high interest rate, then the growth rate won't compound as fast leading to lower valuations. The firm that kathy would use to work for alliance.

Bernstein explains this concept. I myself own high growth stocks in my portfolio, but i still believe that such assets would not benefit from inflation. The reasons i just mentioned are actually similar to chamat's own reasoning when he was explaining why tech stocks are going to go into the toilet tech stocks. In the toilet, no bueno for no cash flow growth, stocks, yeah thing with tech stocks.

Is we tell everybody the same thing? Your money is going to come 30 years from now, because we're going to be a monopoly by then and every dollar that i have today. I'm going to reinvest into r d and engineering in an environment where interest rates are zero, you're happy to do it because you're like well great. These guys are investing at way better rates than zero, which is what i get from. You know my bank, and so i want facebook and google and amazon and all these startups to be putting all this money in the ground on my behalf, but when interest rates start going up, they say no hold on a second.

I need more money up front. Less money in the future, because the future becomes more uncertain and that's the big trade-off for tech companies where they get really pummeled. Chamat's prediction of medium-term inflation sounds logical and it is certainly similar to what michael bury believes. Contrary to both of them.

Kathy wood sees the total opposite occurring. Let me know who you think is right down below. I believe that we'll continue to see high inflation within the next 6 months, but over the span of 6 to 18 months, inflation will likely decelerate substantially. If you enjoyed this video, please hit the like button and subscribe and i'll see you in the next one.