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In this video, I cover why Cathie Wood believes that deflation is coming instead of inflation.
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Link to the interview used in this video: https://www.youtube.com/watch?v=dw9YyvBMa_g
Over the past few months, almost everyone has been warning about upcoming inflation. Ray Dalio, Michael Burry, Warren Buffett, and even consumers worldwide have witnessed inflation start to take off in practically all goods and services. Not only that, but the majority of investors believe that inflation is going to continue to rise substantially in the future. However, as a typical contrarian, Cathie Wood thinks that the opposite is going to happen: deflation. The world has prepared for inflation and the real black swan event in Cathie’s eyes is actually a deflationary crash. This video will go in-depth on why Cathie believes this and how data backs up her claims.
Cathie Wood started out her career as an economist and has decades of experience to back up her claims. Therefore, it’s vital that we see what Cathie has to say, regardless of any preconceived notions. In fact, in the early 1980s, two famous economists, Henry Kaufman and Milton Friedman, thought that inflation was here to stay. On the other hand, Cathie, a relatively new economist, thought that inflation was cooling off. In the end, Cathie was right.
(Note for me: put a card in the corner for the Cathie Wood documentary)
Now, Cathie Wood is making her own bold prediction against the crowd. The first signal pointing towards decelerating inflation is the money supply. The supply of M2 money has increased significantly ever since the pandemic started.
M2 money is a measure of the US money supply that includes savings deposits, checks, cash, checkable deposits, money market funds, and certificates of deposit. Of course, with the rise of stimulus checks, it’s not a surprise that M2 money has increased drastically. However, Cathie Wood is seeing a trend, which is that M2 money growth is slowing down at a rapid pace. M2 money growth has slowed down from 27% in April this year to just 13.8% in May. This slowdown in growth is likely why the bond market has been rallying over the past few months. 10-year treasury bond yields have been suppressed to roughly 1.5% after peaking at 1.7% in March. Because bond yields and bond prices are inversely correlated, this means that the bond market has been rallying as yields are going down. When this happens, we know that the bond market is predicting deflation instead of inflation.
You might think that the bond market has been rallying because of the artificial buying power of the Federal Reserve. However, the Fed has been purchasing bonds for months now, and this isn’t a new variable in the bond market. The buying power from the Fed has not changed the entire time, as even when the bond yields spiked up in March, the Fed’s buying power was still there. In fact, the Fed plans to sell some corporate bonds and corporate bond ETFs that it purchased in the pandemic. After the high inflation reports, Cathie Wood, like every economist, actually expected the bond market to sell off. Nevertheless, bonds have just continued to rally.
As crazy as Cathie Wood may seem, she does actually expect inflation to stay for the next couple of months. The personal consumption expenditures price index has shown that prices have increased 1.6% year over year in February to 3.9% in May. However, Cathie thinks this inflation rate could increase all the way to 5%. So while inflation could heat up for the next couple of months, Cathie sees prices going down long term. The rise in oil prices is ironically setting the stage for deflation. The OPEC, which is a group of many countries that control the supply of oil, is determined to make back some profits by keeping the oil supply low. This may actually be counterintuitive. As oil prices have gone up, more and more people have begun flocking towards electric vehicles. During the pandemic, EV sales have increased disproportionately to fossil fuel vehicles. This is partly influenced by increasing gas prices, and also the idea that EVs are superior to gas-powered vehicles. If oil prices continue to rise, then this will just incentivize more and more people to purchase EVs, which lowers the long-term demand for oil. Crude oil currently sits at roughly $75 per barrel, which is approaching the previous high of $77. Cathie thinks that oil will eventually go down to $3 to $12 per barrel. That’s right, $3 to $12 per barrel. $12 per barrel would be an 84% decline from the current prices. If these low prices come to reality, substantial deflation would come.
In this video, I cover why Cathie Wood believes that deflation is coming instead of inflation.
My Second Channel:
https://www.youtube.com/channel/UCPkDot_lMk7HB_c68HubbUg
Twitter: https://twitter.com/casgains
Instagram: https://www.instagram.com/casgainsacademy/
Link to the interview used in this video: https://www.youtube.com/watch?v=dw9YyvBMa_g
Over the past few months, almost everyone has been warning about upcoming inflation. Ray Dalio, Michael Burry, Warren Buffett, and even consumers worldwide have witnessed inflation start to take off in practically all goods and services. Not only that, but the majority of investors believe that inflation is going to continue to rise substantially in the future. However, as a typical contrarian, Cathie Wood thinks that the opposite is going to happen: deflation. The world has prepared for inflation and the real black swan event in Cathie’s eyes is actually a deflationary crash. This video will go in-depth on why Cathie believes this and how data backs up her claims.
Cathie Wood started out her career as an economist and has decades of experience to back up her claims. Therefore, it’s vital that we see what Cathie has to say, regardless of any preconceived notions. In fact, in the early 1980s, two famous economists, Henry Kaufman and Milton Friedman, thought that inflation was here to stay. On the other hand, Cathie, a relatively new economist, thought that inflation was cooling off. In the end, Cathie was right.
(Note for me: put a card in the corner for the Cathie Wood documentary)
Now, Cathie Wood is making her own bold prediction against the crowd. The first signal pointing towards decelerating inflation is the money supply. The supply of M2 money has increased significantly ever since the pandemic started.
M2 money is a measure of the US money supply that includes savings deposits, checks, cash, checkable deposits, money market funds, and certificates of deposit. Of course, with the rise of stimulus checks, it’s not a surprise that M2 money has increased drastically. However, Cathie Wood is seeing a trend, which is that M2 money growth is slowing down at a rapid pace. M2 money growth has slowed down from 27% in April this year to just 13.8% in May. This slowdown in growth is likely why the bond market has been rallying over the past few months. 10-year treasury bond yields have been suppressed to roughly 1.5% after peaking at 1.7% in March. Because bond yields and bond prices are inversely correlated, this means that the bond market has been rallying as yields are going down. When this happens, we know that the bond market is predicting deflation instead of inflation.
You might think that the bond market has been rallying because of the artificial buying power of the Federal Reserve. However, the Fed has been purchasing bonds for months now, and this isn’t a new variable in the bond market. The buying power from the Fed has not changed the entire time, as even when the bond yields spiked up in March, the Fed’s buying power was still there. In fact, the Fed plans to sell some corporate bonds and corporate bond ETFs that it purchased in the pandemic. After the high inflation reports, Cathie Wood, like every economist, actually expected the bond market to sell off. Nevertheless, bonds have just continued to rally.
As crazy as Cathie Wood may seem, she does actually expect inflation to stay for the next couple of months. The personal consumption expenditures price index has shown that prices have increased 1.6% year over year in February to 3.9% in May. However, Cathie thinks this inflation rate could increase all the way to 5%. So while inflation could heat up for the next couple of months, Cathie sees prices going down long term. The rise in oil prices is ironically setting the stage for deflation. The OPEC, which is a group of many countries that control the supply of oil, is determined to make back some profits by keeping the oil supply low. This may actually be counterintuitive. As oil prices have gone up, more and more people have begun flocking towards electric vehicles. During the pandemic, EV sales have increased disproportionately to fossil fuel vehicles. This is partly influenced by increasing gas prices, and also the idea that EVs are superior to gas-powered vehicles. If oil prices continue to rise, then this will just incentivize more and more people to purchase EVs, which lowers the long-term demand for oil. Crude oil currently sits at roughly $75 per barrel, which is approaching the previous high of $77. Cathie thinks that oil will eventually go down to $3 to $12 per barrel. That’s right, $3 to $12 per barrel. $12 per barrel would be an 84% decline from the current prices. If these low prices come to reality, substantial deflation would come.
Over the past few months, almost everyone has been warning about upcoming inflation, ray dalio, michael bury warren buffett, and even consumers worldwide have witnessed inflation start to take off in practically all goods and services. Not only that, but the majority of investors believe that inflation is going to continue to rise substantially in the future. However, as a typical contrarian kathy would think that the opposite is going to happen. Deflation, the world has prepared for inflation, and the real black swan event in kathy's eyes is actually a deflationary crash.
This video will go in depth on why kathy believes this and how data backs up her claims. Welcome to caspian's academy, if you're new to the channel. Please consider subscribing for more content like this and let's get right into it. Kathy woods started her career as an economist and has decades of experience to back up her claims.
Therefore, it's vital that we see what kathy has to say, regardless of any preconceived notions. In fact, in the early 1980s, two famous economists, henry kaufman and milton friedman, thought that inflation was here to stay. On the other hand, kathy wood, a relatively new economist, thought that inflation was cooling off in the end. Kathy was right now, not surprisingly, kathy wood is making her bold prediction against the crowd.
The first signal pointing towards decelerating inflation, is the money supply. The supply of m2 money has increased significantly ever since the pandemic started. M2. Money is a measure of the u.s money supply that includes savings deposits, checks, cash, checkable deposits, money market funds and certificates of deposit, of course, with the rise of stimulus checks, it's not a surprise that m2 money has increased dramatically.
However, cathy wood is seeing a trend, which is that m2 money growth is slowing down at a rapid pace. M2 money growth has slowed down from 27 in april this year to just 17 in may. This slowdown in growth is likely why the bond market has been rallying over the past few months. 10-Year treasury bond yields have been suppressed to roughly 1.5 percent after peaking at 1.7 in march, because bond yields and bond prices are inversely correlated.
This means that the bond market has been rallying, as yields are going down. When this happens, we know that the bond market is predicting deflation instead of inflation. The the bond market could be rallying because of what i just mentioned about money growth. I don't think many uh economists have observed.
I haven't seen it at least that the money growth rate has been cut in half from that 27 percent to 13 13.8 percent. Maybe the bond bond market is uh focused on that. You might think that the bond market has been rallying because of the artificial buying power of the federal reserve. However, the fed has been purchasing bonds for months now, and this isn't a new variable in the bond market.
The buying power from the fed has not changed. The entire time, as even when the bond yield spiked up in march, the fed's buying power was still there. In fact, the fed plan to sell some corporate bonds and corporate bond etfs that it purchased in the pandemic. After the high inflation reports, kathy wood, like every economist, actually expected the bond market to sell off. Nevertheless, bonds have just continued to rally, but i will tell you, with the cpi reports that we have gotten ppi as well much higher than expected. I would have expected the bond market to continue to sell off and interest rates, therefore, to go up instead, since the end of march, the 10-year treasury bond yield has dropped from 1.74 to 1.43, no matter how strong the economic data have been, how high the inflation Numbers have been, and so the the bond market is sniffing, something out. I believe now many will say: well, it's just quantitative, easing and uh. I i think quantitative easing was true at the beginning of this year and through march, when we went from 0.9 to 1.74.
So nothing's changed uh on that score, but the bond market is sniffing out something here as crazy as cathy wood may seem. She does actually expect inflation to stay for the next couple of months. The personal consumption expenditures price index has shown that prices have increased 1.6 year-over-year in february to 3.9. In may, however, kathy thinks that this inflation rate could increase all the way to five percent.
So, while inflation could heat up for the next couple of months, kathy sees prices going down long term. The rise in oil prices is ironically, setting the stage for deflation. The opec, which is a group of many countries, that control the supply of oil, is determined to make back some profits by keeping the oil supply low. This may actually be counter intuitive, as oil prices have gone up.
More and more people have begun flocking towards electric vehicles. During the pandemic, ev sales have increased disproportionately to fossil fuel vehicles. This is partly influenced by increasing gas prices and also the idea that evs are superior to gas powered vehicles. If oil prices continue to rise, then this will just incentivize more and more people to purchase evs, which lowers the long-term demand for oil.
Crude oil currently sits at roughly 75 dollars per barrel, which is approaching the previous high of 77 kathy thinks that oil will eventually go down to 3 to 12 dollars per barrel. That's right, 3-12 per barrel 12 per barrel would be an 84 decline from the current prices. If these low prices come to reality, substantial deflation would come. One of the reasons is, of course, uh opec, and they have about five million barrows barrels spare barrels.
They could produce per day they're. Not they want to keep the oil price high enough, so they can fund their budgets. But at some point here they may end up killing demand when they start seeing demand destruction. Because of pricing. I do think they'll start producing and, as you know, longer term, the combination of electric and autonomous electric vehicles, we think, is going to drive oil prices down. As i've said now, this is my point of view. We haven't done the research uh to get us here yet, but i think we could go down back down to where oil prices landed after the cartel took over in the early 70s and they went from. I think three dollars a barrel or four dollars to twelve dollars a barrel, wouldn't be surprised ultimately to see us back there, especially as electric vehicles continue to take off and they are starting to take significant share.
Another piece of data that points towards deflation is the purchasing power of the us dollar. In the past month. The dollar index has spiked up significantly. This directly contrasts with the fears of inflation in the dollar, as the dollar is actually gaining purchasing power compared to other currencies.
This may be from biden's corporate and capital gains taxes coming in lower than expected. Additionally, commodities have also been crashing lately. Lumber prices in particular have taken a sudden turn downwards, which cathy wood actually predicted before the crash happened. There are also a couple of other signals, including china's pork prices and copper prices, which kathy mentions in the following clip against.
I think the consensus expectation, the consensus short in terms of currencies, was on the dollar at the beginning of this year and the dollar is not going down uh and that's that's also consistent with the bond yields coming down. Surprisingly, the last factor is consumer demand. Real consumption drops 0.4 month over month, durable goods. Consumption in particular, is down four point three percent month over month and non-durable goods consumption is down 0.5 percent month over month.
At the same time, services consumption is only up 0.4 month over month, which is not as high as the decline in goods consumption overall, as demonstrated by the crash in commodity prices, goods, consumption and the slowdown of growth in the money supply. Inflation might not be as serious of a problem as you think on the other side of the debate. There are many counter arguments such as ray dalio, calling out the bond bubble and michael bury claimed that hyperinflation is coming personally. I believe that in the long run, inflation won't be a problem.
However, in the short term, inflation could be higher than expected as consumption increases across the board. Let me know what you think in the comment section below if you're interested in my personal research reports my buy and sell alerts, how i navigate my new 25 thousand dollar portfolio, which i have a goal of growing to 100 000 exclusive valuation, spreadsheets and my main Portfolio check out my patreon in the first link down below i'll also leave a link to the full interview i used down below. If you enjoyed this video, please hit the like button and subscribe and i'll see you in the next one.
So far, every video I have seen of hers I've disagreed with. It's now late October, we've experienced massive inflation contrary to what she states as well as oil prices going down. I don't even begin to agree with that theory…
EV vehicles still rely on grid electricity (natural gas, oil, coal, a small percentage of wind and solar). All energy prices are going up…not just oil., so too will the cost of operating an EV. I dont necessarily see demand destruction as intense as you deem it
cathie woods needs to be humbled by her huge EGO, oil can not be produced for $3/bbl, lmao. lifting cost is about $12/bbl. why are you comparing oil price to something back in the 70s lol
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"Most people procrastinate because they're unsure. We overanalyze because we're unsure. Just do it anyway. Time costs lives
Because of the economic crisis and the rate of unemployment now is the best time to invest and make money 💯
Hello, I'm new to Biticon trade and I've been making losses but recently I see a lot of people earning from it. Please can someone tell me what I'm doing wrong
Investment is one of the quickest part to financial freedom the rich stays rich spending like the poor yet investing while poor stays poor by spending like the rich yet not investing
Just buy stocks in McDonalds. It doesn't get effected by anything. People will always eat and sh*t.
Deflation of assets in real value yes, price inflation also yes. Chatie Wood ETF far UNDERperformed the SP500 since 2015, she had one good year: 2020.
I disagree with deflation theory. At the end of the day, the government cannot withstand deflation, since it has 30 trill in debt. So they can either try to take dollars away through taxes to pay for it, or they can take purchasing power away by spending printed money. I think spending into inflation is going to be more politically palatable. Inflation will widen the gap between those who have assets and those who don't.
Say big thank you for your government and claim compensation from your government and China. Do not forget there was not agreement for lockdown at all. Let start from 35 000 000 pounds for wearing a mask per person. 500 000 000 pounds per person for lockdown without resons. Only amandatine and invermectin.
The mower that was $1200 at the start of 2021 is now $1600 at my local big blue box store. It COULD be that they will price "carbon" items out the roof like they do "expired" refrigerant and inflation will go away with electric products. Otherwise inflation stays
Saying a upcoming crash is coming is like the bible trumpets on here saying the 2nd coming of Jesus is coming… WELL WHEN ARE ANY OF THESE COMING??? YOU PEOPLE KNOW NOTHING
Crashes generally cause deflation. Look back at any other crash. So really the question is. Is a crash coming.
Cathie Wood, what ARE you smoking dear? In a way you are right since all hyperinflations end in depression and deflation, but not for a long time and not without enormous damage to nations going through it.
So I think that there is inflation and deflation happening at the same time. The bond prices are increasing because of increasing savings account from individuals, forcing banks to have a higher demand for assets to maintain their supplemental leverage ratio. The SLR is set to expire, creating a demand for bonds. At the same time, the federal government was slow in issuing bonds at the same time when banks needed them. The bond marking isn't "sniffing" something out. It is simply decreased supply with increased demand. The velocity of money is very slow due to consumer pessimism from COVID.
The deflation that Kathy is talking about in the oil market is due to the natural deflationary pressures that technology offers. Increased technology will create plenty in what previously was lacking. Sure a decline in oil prices will decrease the cost of all goods, but is it sufficient enough and drastic enough to overcome the inflation that is to come. I don't think so. It will take five years for deflation to occur from EV. The game-changer could be solid-state batteries. If there is a breakthrough in SSB then yes deflation will occur, but this is yet to be available. Maye fusion energy will become a reality. That would change everything. But I do see that happening anytime soon. So in the near future, inflation or hyperinflation will be the issue. Maybe cryptocurrency will be the saving grace from falling into chaos and regime changes. Afterwish deflation will occur.
All that to say, our monetary and fiscal policy will result in a big rubber band. It will first stretch and then it will snap back. Good luck in adjusting and timing it all. Too many factors to predict when this will happen, but it will happen.
The market is correcting. We want this to happen slowly. If it crashes, we're fucked.
Price destruction on oil is not solely due to price. I am buying an electric vehicle in 2022 because of climate change and the change to environment that I have in my lifetime. Oil can be 5 cents a litre for all I care, I am not buying a internal combustion vehicle for the rest of my life.
Sometimes it seems like the so-called "knowledgeable" people are hoping for some kind of crash.
Inflation may not be viewed as a long term problem, but the spectacle of the US cynically using its reserve privilege to plunder the rest of the world must ultimately lead to the loss of that priviledge. Subsequent debt defaults would destroy many trillions of dollars. By definition deflation is the destruction of dollars. So inflation first followed by deflation.
The disaster in Afghanistan will accelerate this because reserve status also rests on perceptions of US military power. Those perceptions have now been shaken. Perhaps the next shoe to drop is a Russian invasion of Ukraine or China of Taiwan. A US military failure in Taiwan would probably result in the rapid repudiation of USD as the reserve currency. Replaced by what ? Unknown which is perhaps the last trump card the US holds.
The only mechanism for a deflationary crash is a collapse of the banking system with widespread loss of deposits. How do banks collapse. Widespread defaults on loans.
All that seems plausible, but what stops the FED from providing funding to banks and to the FDIC to save deposits.
Thus it seems deflation must come after inflation which leads to a loss of confidence in USD with offshore central banks dumping dollars. If the US effectively looses reserve currency status, we will no longer be able to borrow cost free meaning interest rates will have to go up substantially. This seems like a plausible mechanism for banking collapse in the US.
This is all good and well but why in the 21st C is a deflationary period a bad thing?
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i think if a lot people fear that inflation going to happen … it will eventually happen .
here are two synergistic factors that will tip the global economy in the next few months—–>
Truckers in both both america and australia are planning nationwide boycotts starting august 31st to protests the covid vaccine mandates;
but electric vehicles are charged with dirty energy anyway.. and if oil get less relevant it won’t be dictating the economy
Nice video! I was able to build a big income stream during the covid-19 pandemic investing with a professional broker, Mrs Virginia Robin.
in this Fed supported 'market' what would be the safest haven? Annuity, dividend paying whole life policy, or bonds?
I think it’s crazy so many people don’t believe the Fed know what they are doing. They are masters of their craft. They are going to make a huge scoop and steal from the upper middle class, starting with the deflation of the housing market, then the stock market. They won’t do it by inflation, because every middle school kid is parroting the inflation story. It’s going to be a massive deflation something along the lines of the Great Depression.
Do not worry guys – Everybody gangsta until:-
1. Global warming destroy port trades and crash it down or switch all trade to Airways leading to Airline industry going BRR
2. Air pollution will drive up Pharma, mask companies and Air purifiers and their stocks go BRR😂🤣
Market crash fear has been going on since 2016, and every year, there are analysts, youtube videos predicting market crashes. How about stop timing the market and predicting interest rates ? Didn't you all learn anything from Buffet ?
Just check M1 money supply chart in the US 2000-2021. It looks horrific. Consider also Biden's 6T spending plan and his tax plans. There is NO WAY this is going to pass without some serious problems. Basically everything is backwards: taxes are going way up, debt is way up, money supply is way up. Everything is WRONG and nothing good can come out of this.
Any reason why fed will not use the following easy and proven technique this time ?
# If deflation : print more money.
# If inflation : stop printing.
# Analysts keep on saying that it's not so easy 😀