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In this video, I cover why Cathie Wood thinks that the entire commodity asset class is about to collapse and what implications this has on other assets.
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Link to Cathie Wood's video: https://www.youtube.com/watch?v=i17erEpctKQ
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Over the past few months, we’ve seen price levels increase all across the board. Copper prices have almost doubled in the past 12 months and even sugar is up almost 50% over the past 12 months. Not only that, but assets like stocks, cryptos, and real estate are all up substantially year over year (do sliding animation). Cathie Wood recently spoke up about how one asset, in particular, has been in a massive bubble and is actually on the verge of popping soon. In this video, I’ll cover what that asset class is and how this will impact the economy at large and the other asset classes. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
Over the past 12 months, an interesting and unusual movement has occurred within the economy, which has fueled up a major bubble. Because of the pandemic, consumers have been spending money on goods rather than services, especially in the middle of the pandemic when services were shut down. Essentially, most of us have already spent money on items like computers, air conditioners, and washing machines. As a result, we don’t need to purchase a new computer, a new AC, or a new washing machine. We’ve already stocked up on those items. Now, more and more consumers are purchasing services while spending on goods is decreasing. However, since spending on goods hasn’t decreased much yet, the price level for goods has increased because businesses cannot meet the high demand from consumers. This has led businesses to order plenty of materials for their supply chains, which ultimately leads raw material prices to increase. As I covered earlier, raw materials are exploding in value, with lumber prices almost up fourfold. Unbeknownst to the businesses that have been panicking to meet the high consumer demand, consumer demand for goods is starting to dwindle. This is because as vaccinations continue to roll out, consumers are spending more and more money on the services that are opening up, including eating outside, traveling to meet friends, and going on vacation. This is all about to tie together and result in very serious implications that I’ll soon cover. The problem with our current situation is that the businesses that sell goods have ordered too many materials. However, because consumers already stocked up on goods and are now spending on services, the businesses that sell goods will have to cancel a significant amount of their orders on the materials needed for their supply chains. After these cancellations occur, commodity prices are going to collapse, which definitely has huge implications for other asset classes like stocks and real estate. By the way, this isn’t just something Cathie is predicting, the data that recently came out about consumer spending directly supports her theory. The result of this entire situation is a fast decline in commodities. Businesses ordering massive amounts of materials have fueled the commodity bubble, and now, all of a sudden, after these cancellations, the price of commodities is going to collapse. Cathie Wood likens this event to the cartoon Wile E Coyote falling off a cliff because commodity prices are practically going to fall off a cliff (Use this footage as I’m talking and put the word “commodity prices” on the coyote so that the Coyote looks like this, and have that title animation follow the coyote as it falls down. So now that we know that there’s likely going to be a crash in commodity prices, you might be wondering how this impacts other asset classes that you might be invested in such as stocks and real estate. First of all, if commodity prices drop, then that serves as a deflationary force, as the price of goods will fall with commodities. As a result, inflation won’t be as high as expected. Cathie is already seeing investors predict this right now, as bond yields are going down at the moment, which means that investors aren’t as scared of inflation as you might think.
In this video, I cover why Cathie Wood thinks that the entire commodity asset class is about to collapse and what implications this has on other assets.
My Second Channel:
https://www.youtube.com/channel/UCPkDot_lMk7HB_c68HubbUg
Twitter: https://twitter.com/casgains
Instagram: https://www.instagram.com/casgainsacademy/
Link to Cathie Wood's video: https://www.youtube.com/watch?v=i17erEpctKQ
Soundtracks provided by LCS, Nanobyte, Emphermal, Defyant, and Lakey Inspired
Copyright Disclaimer Under Section 107 of the Copyright Act 1976: All rights belong to their respective owners.
Over the past few months, we’ve seen price levels increase all across the board. Copper prices have almost doubled in the past 12 months and even sugar is up almost 50% over the past 12 months. Not only that, but assets like stocks, cryptos, and real estate are all up substantially year over year (do sliding animation). Cathie Wood recently spoke up about how one asset, in particular, has been in a massive bubble and is actually on the verge of popping soon. In this video, I’ll cover what that asset class is and how this will impact the economy at large and the other asset classes. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
Over the past 12 months, an interesting and unusual movement has occurred within the economy, which has fueled up a major bubble. Because of the pandemic, consumers have been spending money on goods rather than services, especially in the middle of the pandemic when services were shut down. Essentially, most of us have already spent money on items like computers, air conditioners, and washing machines. As a result, we don’t need to purchase a new computer, a new AC, or a new washing machine. We’ve already stocked up on those items. Now, more and more consumers are purchasing services while spending on goods is decreasing. However, since spending on goods hasn’t decreased much yet, the price level for goods has increased because businesses cannot meet the high demand from consumers. This has led businesses to order plenty of materials for their supply chains, which ultimately leads raw material prices to increase. As I covered earlier, raw materials are exploding in value, with lumber prices almost up fourfold. Unbeknownst to the businesses that have been panicking to meet the high consumer demand, consumer demand for goods is starting to dwindle. This is because as vaccinations continue to roll out, consumers are spending more and more money on the services that are opening up, including eating outside, traveling to meet friends, and going on vacation. This is all about to tie together and result in very serious implications that I’ll soon cover. The problem with our current situation is that the businesses that sell goods have ordered too many materials. However, because consumers already stocked up on goods and are now spending on services, the businesses that sell goods will have to cancel a significant amount of their orders on the materials needed for their supply chains. After these cancellations occur, commodity prices are going to collapse, which definitely has huge implications for other asset classes like stocks and real estate. By the way, this isn’t just something Cathie is predicting, the data that recently came out about consumer spending directly supports her theory. The result of this entire situation is a fast decline in commodities. Businesses ordering massive amounts of materials have fueled the commodity bubble, and now, all of a sudden, after these cancellations, the price of commodities is going to collapse. Cathie Wood likens this event to the cartoon Wile E Coyote falling off a cliff because commodity prices are practically going to fall off a cliff (Use this footage as I’m talking and put the word “commodity prices” on the coyote so that the Coyote looks like this, and have that title animation follow the coyote as it falls down. So now that we know that there’s likely going to be a crash in commodity prices, you might be wondering how this impacts other asset classes that you might be invested in such as stocks and real estate. First of all, if commodity prices drop, then that serves as a deflationary force, as the price of goods will fall with commodities. As a result, inflation won’t be as high as expected. Cathie is already seeing investors predict this right now, as bond yields are going down at the moment, which means that investors aren’t as scared of inflation as you might think.
Over the past few months, we've seen price levels increase all across the board. Copper prices have almost doubled. In the past 12 months, oil prices have also doubled, and even sugar is up almost 50 percent over the past 12 months. Not only that, but assets like stocks, cryptos and real estate are all up substantially year.
Over year. Kathy wood recently spoke up about how one acid in particular has been in a massive bubble and is actually on the verge of popping. Soon in this video i will cover what that asset class is and how this will impact the economy at large, in the other asset classes. Welcome to castain's academy, if you're new to the channel, please consider subscribing for more content like this and let's get right into it over the past 12 months.
An interesting and unusual movement has occurred within the economy, which has fueled up a major bubble because of the pandemic. Consumers have been spending money on goods rather than services, especially in the middle of the pandemic. When services were shut down, what did the consumer spend on goods, non-durable and durable goods, because those were the only uh items that consumers uh could spend anything on? Um services were pretty much uh shut down now. What's interesting about this, is goods make up uh only well, actually less than a third of all consumer spending services make up the rest, so for the past year the consumer pre-vaccination especially, was focusing his or her spending on goods.
Just a third of a typical budget and consumer spending rose as a share of total spending to more than 40 percent. I don't think it's been that high in the united states in quite some time. As a result, we believe that consumers have actually been building inventories themselves at home in a typical consumer market basket. Commodities make up around one-third of overall consumer spending over the past year.
However, this type of spending has passed over 41 percent of the basket. Cathy would foresee that this is not sustainable and that after a few months, spending in this category will drop below 30 percent, so in other words, businesses will be left holding the bank as they will have massive inventory with not as much expected demand. Essentially, most of us have already spent money on items like computers, air conditioners and washing machines. As a result, we don't need to purchase a new computer, a new ac or a new washing machine, we've already stocked up on those items.
Now, more and more consumers are purchasing services, while spending on goods is decreasing. However, since spending on goods hasn't decreased much, yet the price level for goods has increased, because businesses cannot meet the high demand from consumers. This has led businesses to order plenty of materials for their supply chains, which ultimately leads raw material prices to increase. As i covered earlier, raw materials are exploding in value with lumber prices, almost up fourfold unbeknownst to the businesses that have been panicking to meet the high consumer demand. Consumer demand for goods is starting to dwindle. This is because, as vaccinations continue to roll out, consumers are spending more and more money on the services that are opening up, including eating outside traveling, to meet friends and going on vacation. This is all about to tie together and result in very serious implications. That'll soon cover now, what we think is also happening is that businesses are still scrambling trying to catch up.
Inventories relative to sales are at a record low and as a result, that businesses are losing sales and they become a bit panicked about it, and so this scramble continues and usually when, when i hear panic and scramble it, it means double ordering triple ordering to make Sure uh to get those supplies so that they won't lose sales in the future. Meanwhile, the consumer has has already shifted to services. If you look at retail sales in in in april uh, they were flat. They were expected to be up one percent.
Now they had had uh the prior month, a huge increase, 10.7 percent, but nonetheless a surprise relative to expectations. The problem with our current situation is that businesses that sell goods have ordered too many materials. However, because consumers already stocked up on goods and are now spending on services, the businesses that sell goods will have to cancel a significant amount of their orders on the materials needed for their supply chains. After these cancellations occur, commodity prices are going to collapse, which definitely has huge implications for other asset classes like stocks and real estate.
By the way, this isn't just something kathy is predicting. The data that recently came out about consumer spending directly supports her theory. If you look at real consumption in april, it was down slightly, but if you look at real goods consumption in april, it was down 1.3 percent. Now this makes sense, because if you look at the past year, real goods consumption, increased 74 percent.
Think about that in the last year the consumption of durables has increased 74, and so now that the consumer is filled up on durables and i'm sure non-durable goods as well. The spending towards services has begun and we did see services consumption up 0.6. That month, the result of this entire situation is a fast decline in commodities. Businesses ordering massive amounts of materials have filled the commodity bubble and now, all of a sudden after these cancellations, the price of commodities, is going to collapse.
Kathy would likens this event to the cartoon wildly coyote falling off a cliff, because commodity prices are practically going to fall off a cliff businesses. I mean this is going to be like wiley coyote. Businesses are scrambling, scrambling scrambling to catch up to the consumer, but the consumers left so wiley coyotes off the cliff and i think, we're going to see a pretty serious drop in commodity prices. We have already started to see some of these uh copper price. Uh peaked at uh four dollars and ninety cents is down to roughly 450 uh we're seeing lumber prices. They peaked at us uh 1711 per uh, whatever the metric is uh random sheaths or something like that. Uh uh, now down to about as low as 1200. So 1711 to 1200 uh is quite the drop um right now hovering a little below 1300..
So now that we know that there's likely going to be a crash in commodity prices, you might be wondering how this impacts other asset classes that you might be invested in. Such as stocks and real estate, first of all, if commodity prices drop, then that serves as a deflationary force as the price of goods will fall with commodities. As a result, inflation won't be as high as expected. Kathy is already seeing.
Investors predict this right now, as bond yields are going down at the moment, which means that investors aren't as scared of inflation, as you might think, one other um indicator very important to us is beginning to confirm that this might be a little bit more real than The skeptics would suggest the treasury bond yield has dropped from 1.75 percent. This is the 10-year treasury bond, so uh 1.75 percent to a 1.55 percent, and today we got the wages higher than expected. We've seen inflation indicators higher than expected, as i just mentioned, and yet the bond yield is going down, so inflation indicators are higher than expected right now, but bond yields are going down which contradicts that this is signaling. How investors expect inflation to actually be lower than expected, as commodity prices fall? The bond market is definitely something that all investors should watch as it shows clues about.
What's coming, for example, every recession had an inverted yield curve in the bond market before the recession actually happened. In fact, in 2006 the bond market predicted that energy prices were going to soar uh. This reminds me much a lot of 2006. uh.
The bond market got that one right as well. Energy prices soared from uh 2006. I think they were at 60 all the way to hundred and forty dollars in the spring of 08. Even though the writing about housing was on the wall, maybe it wasn't on the wall in 2006, but that's when the bond market began to see it uh so uh.
We believe that the bond market is recognizing here, uh, that inflation is not a problem and uh and that growth may slow down as of right. Now, the rising commodity prices and inflation has led value stocks like energy and financial related stocks to rise significantly in value. In the short term, during this time, as i'm sure many of you have seen, tesla and other growth oriented stocks have fallen substantially. However, as commodity prices crash and inflation comes in lower than expected, road stocks could take off due to lower interest rates. Not only that, but value-oriented stocks have increased due to short-term recovery growth rates, but as recovery spending dwindles down, these value stocks suddenly won't be attractive. As growth stocks that are growing much faster, as we've been saying for quite some time, that the bull market is alive and well and it is broadening towards value and cyclical sectors, or maybe i should say it has broadened. This has happened and we thought it would and we thought it would hurt innovation-oriented strategies. It has done that as well.
Now, if we're right and everything i just suggested, based on the evidence, we're seeing occurs, then these cyclical sectors are setting up uh for a fall and that should accrue to the benefit of uh innovation. Just like kathy wood. I strongly believe that our current times are a great opportunity to continue investing for the long term on patreon you'll, be able to see how i navigate the market in real time. Patreon is where i share my buy and sell alerts, my brand new 25 000 portfolio, which i have a goal of reaching 100 000: my main stock portfolio, my watch list, stock market updates and valuation spreadsheets.
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I realized that the secret to making a million is making better investment. I always tell myself you don't need that new Car or that vacation just yet and that mindset helps me make more money invest:ng. For example last year I invested 70k in blue chip stocks and crypt0 s (with the help of my advisor of course) and made about 380k, but guess what? I put it back and traded with her again and now I'm rounding up close to a million. Delayed gratification always pays off
Successful people don't become that way overnight. What most people see at a glance wealth, a great career, purpose is the result of hard work and hustle over time. I pray that anyone who reads this will be successful in life
YA BUT the elephant in the room: Massive growth in the money supply and real inflation of 10-12%. The US debt has nearly doubled in the last ten years or so. Commodities are one thing, massive overinflation of the dollar is on a whole other level.
The bubble is not in commodities it is in the hype cycle for technology and the supposed gains in productivity. Would you buy a business that takes 33 years to pay you back your money? That is the current PE for the S & P 500 and the Growth Stocks Woods mentions are even higher at the 70 plus PE level. It is always best just to keep to Key Performance Indicators when you evaluate anything and Price Earning is macro enough to tell you the story overall. None of my money is going into 70 PE stocks no what what these talking heads state.
OK. So you believe Biden and crew are going to be responsible spenders. I think they are going to spend like we can print our own money and the world just keeps taking dollars.
I think 2021 would be the best time to invest. Unfortunately a lot of people who have savings and hard currency would pay back all the debt which has accumulated since the past year and half, inflation and devaluation will come in play to absorb these debts. For me buying the right assets and investing in decentralized assets would be a way to escape this mess, when things go down something always comes up so i'd rather take the opportunities.
Every business owner I know can not find employees, parts, supplies, etc (especially employees). Most business owners just treading water. Some are starting to sink.
It will only take one little nail to pop this bubble. Fund managers already have the green light to sell all once it starts. It will be ugly.
The fed is buying 25 billion in bonds every month. The bond market is not a gauge for inflation, anymore than it is a gauge for how much gas is in your car.
They stayed home for a year and learned to cook. And they discovered the perks for cooking from home: 50% cheaper. And they have excess money just by hitting the kitchen. And watched streaming channels instead of cut theoat price at the theater and popcorn and coke.
I think Cathie needs to do the same by using her kitchen.
Yes but all this is based on the pandemic being over and everything in services being open 100% immediately and for the foreseeable future… With most of the world NON vaccinated and variants coming out fast there is no way we are actually done with this virus…
People bought goods because they were scared shitless of store shelves being empty when they needed something. End of story. Wtf are we even talking about here?
Business found out they could sell things at crazy prices due to shortages during the lock-down. After finding out they can sell less for higher prices do you thing they won't notice this?
Complet and utter nonsense. Durable goods have been in short supply during the pandemic because of the pandemic. I tried buying durable goods in the last year. Everything was out of stock and/or lead times were extremely long,.. ergo prices rose.
If goods spending is relatively higher, it's because services like restaurants were substantially lower. The GDP in 2020 shrunk vs 2019.
Once again cathie wood has it wrong.
The bubbles are in fad stocks like tesla, ev SPACs, gme,…
Traditional stocks have been run up to be dumped. This was the plan over a year ago? All the dollars will flush towards a small group of fast growth, next generation tech stocks. However, they also are flawed and respresent speculative value. The goal is to drive value stocks in the gutter so they can be bought back at a price that makes them cows to be milked. At the same time, the cash rich tech firms will buy the traditional firms that actually produce something ( gas, components, minerals, raw materials etc) for pennies on the dollar. Rats run the program.
The Rich are rich not because they look rich, but rather becAuse they possess the skills and strategies of the rich.The rich invest their money first into asset first before purchasing liabilities.the rich build multiple incOme streams to diversify thier income
Great time to buy an air conditioner. I agree with her. People are ready to go out and have experiences again, hence the services. It is really too bad that people are not considering just traveling in their own states or their own cities because they would bring in the revenue locally. During pandemic restaurant businesses were not thriving, however, Fast food places, pizza delivery, and others were thriving. But it was just because no one had anything else to do but stand in line at Costco. If you want to start making money I suggest investors follow the young mindset, that you start thinking about creating entertainment spaces for those millennial families. That all of a sudden are now homeowners. Walt Disney was very astute, and successful with Disneyland because people after the war, after depression, were ready to be entertained. He understood that it had to be the family level to make it work. And he understood good service. Even the rich are ready for their own experience, a leap to the moon. I wish the rich would invest in the youth, improving their local, ground bound communities, to reach more people by giving them experiences here on land. Places that can transport you to a destination, all within a drive able distance.
Okay, so the way I see it we are going to get ripples, like a stone dropped into a pool of water. Companies hold inventories "just in time" have been rushing all at once to place new orders and the supply chain can't cope, and with competition for resource and shipments prices soar. Thus consumables soar because of the scarcity of wholesale supplies, Here in NZ we see it as 3.3% inflation so far, and we expect more.
We see this growth ripple as short term because they are simply a logistical issue and as prices soar consumers will decide to wait it out and spend elsewhere (on services) and as inventories are restocked, prices will again diminish, and we get to see a low point, followed by a slight increase in demand from consumers when they catch on that business is returning to normal and so on and so on until the ripples decrease and normalize – mainly because wages have not and are likely to not move to the same extent. But the deflation tale always takes longer to be realised than inflation.. by the time we get deflation most companies will be grabbling with issues with margin. (It's' never a problem raising prices but deceasing them and the board gets anxious).
Now what happens in the financial markets – well some old thinking will see those increases in revenues for underlying resources and they'll back them. but those fundamentals will not be long lived, its two things – one a move to risker investment caused by cheap interest rates derived from monetary policy which is over cooking the world's economy, and two smart money picking short term market disruption and quick money is made on these swings for capital gain. But the long term view is unchanged – you can play the market or sit on long term positions, as we expect a lower long increment in underlying values for commodities that are in essence finite continue so long as populations and thus demand are not diminished by covid. So over the long haul you will be cool if you hold and you don't need to recycle the cash in the near term, However there is a large amount of long term money that is now entering the market (think superplans) and they are buying at a premium at the top end and likely to experience a correction down the road as sitting patzies do = perhaps this or next year we'll see losses because the yields have become disconnected with reality…but were else do they stick it? and what's their thinking on other modes of investment?- in my experience they are always slow to tact their investment strategy to best benefit customers in todays market conditions. They'll simply hide the loss in the long term portfolio holding.. cause they are margin seekers and really don't care what the return is so long as their plan is not seen as under performing against benchmark.
There's money in the streets but its value is close to zero. US politics is to invade the world with paper, as usual, but this time It doesn't have the supremacy it did 30 years ago
See failed to mention the $hit storm that is coming with a COVID strain that is immune to our vaccine. It will be a true epidemic then, because we are already COVID fatigued and no one will stay home or wear a mask. Death tells will be catastrophic and the economy will have a complete reset.
The metric for measuring lumber prices is FBM or Foot Board Measure. The price of lumber based on X$ per one thousand board feet. Or one thousand FBM.
This video contradicts Peter schiff.
I am siding with Peter, as well as many other smart economists. I am treating the US dollar like a hot potato; I toss it in exchange for silver
the flaw in the thinking is that the computer, ac, washing machine is going to last. Everything is made to break and be disposed of and junk made during pandemic is even worse. the cycle may be delayed some, but all this junk will go into the dumps/recycling per planned obsolecence.
Gasoline up 40 percent in recent months and future supplies will be restricted because of the Democrats' war on fossil fuels. Food prices up between 20 percent and 40 percent in recent months because of Democrats paying farmers not to plant crops. Rent costs way up. Monthly mortgage costs way up because of the spiraling cost of houses. But these costs are not figured into the cost of living by the government. As for me, I paid off my mortgage and am stockpiling non-perishable food. The next few years are going to be one rocky ride.