Arkhan vest is experiencing the worst downturn in the company's history. Arc's flagship etf is down roughly 40 percent in the past year, while the s p 500 is up almost 25. That is a frightening gap for arc investors. The reason for this underperformance ultimately ties down to the macro economy.

If these factors are not reversed or at least resolved arc, invest will continue to crash even more. This video will explain what those factors are and what kathy would herself have to say about arkhan vest's downturn. The federal reserve has totally failed on all accounts in regards to saving america's economy. After fed chair jerome powell printed exorbitant sums of money during the pandemic, equities and consumer prices accelerated to all-time highs.

Now the federal reserve is doing the exact opposite of that. The fed is now quickly retracing its previous decisions and will soon pull out money from the economy by mid-march. The fed estimates that it'll no longer be purchasing bonds, also known as quantitative easing starting from there. The fed will be reducing its balance sheet by selling bonds and raising interest rates.

In simpler terms, the fed turned on the money printer in 2020 in 2021, but now in 2022 the fed will be using a vacuum to suck back a significant amount of that money. This will almost certainly negatively impact the economy in the short term, which is already being priced into the current valuations. This is because, when the fed sells bonds, bond yields must increase. Increasing interest rates are problematic for innovative companies, because innovative companies need to constantly borrow money to continue growing higher interest rates mean that the cost of borrowing is more expensive, which would be detrimental to innovative companies.

Bond yields recently increased and investors only expect these yields to increase even more because of that arc invest. Related stocks are continuing to crash week after week. So the question is: when will this turmoil stop so that innovation will rebound the answer centers around inflation? If the fed's retraction leads innovation to quickly decelerate, it's extremely likely that the fed will revert back to quantitative easing, which is when the fed purchases bonds. On the flip side, if inflation continues to accelerate to new highs, the fed will have to either stick to its existing game plan or be even more aggressive with this retraction.

So in simple terms, if inflation cools down, then the money printer will likely turn back on which would benefit arc, invest. On the contrary, if inflation heats up, the money vacuum will stay leading arc to crash even more kathy. Wood believes that the first scenario will happen for a variety of reasons, but first i want to address their explanation as to why arc is crashing so much. Algorithmic traders have been pricing in the second scenario that we talked about, which is that inflation is going to continue to stay at elevated levels.

Many investors assume that algorithmic traders make market prices more efficient, but the complete opposite actually happens during the beginning of the pandemic. Algorithmic traders were focused on shorting companies that were burning money and also had a low cash cushion these algorithms broadly work, but not for certain sectors. For instance, genomic stocks fit those characteristics and were therefore punished heavily. However, any logical human being would know that genomics companies were going to be part of the solution to the pandemic.

This led genomics talks to rally a month after being initially punished, kathy believed when exactly the same situation, but with almost all innovative stocks. Algorithmic traders are punishing stocks that are deemed as riskier and are rotating into value because of inflation fears and rising interest rates. Some of these characteristics include high valuation, multiples, miniscule, profits, declining revenue, growth and low cash, cushions two of ark's highest conviction. Stocks that follow these characteristics are zoom and teledoc.

Both of these stocks are getting absolutely destroyed, as they are both down. Roughly 70 percent from their highs. Teledoc is arc's. Second largest position and zoom is arc's.

Fourth largest position. Investors liking these two stocks, detect companies during the dot-com bubble, but kathy thinks they are totally wrong. She believes that the dot-com bubble was premature and that the dreams of that time were becoming real now the dreams back then so the internet was quite transformative and led to the cloud and artificial intelligence. We are living in the reality that that dream started and uh.

This reality has companies like teledoc and zoom. Just to give you a sense of the contrast here, you know, teledoc has about 2 billion in sales. Its revenues have gone up four-fold since the beginning of the coronavirus, and we don't think that its revenues are going to go down. What we're seeing in the market is a focus on year-over-year momentum and the the comparison that we're going to see, and this is the last of the really tough comparisons zoom's revenue one year ago.

Fourth quarter was up 370 percent and uh in this fourth quarter. The quarter they will report soon. We believe, and their guidance is that that revenue will be up 19 to 20 percent. Think about that on top of 370 percent up 19 to 20 percent, and that's probably the low point of its growth rate, we believe or zoom's revenue growth is going to accelerate from there we covered what the macroeconomic landscape is and how that is, causing arkhan vest To crash, but when is this crash going to end once inflation begins to cool down arc will most likely rebound significantly kathy believes that several signals are showing that inflation could decelerate substantially within the next few months.

The traditional finance media is not covering any of these indicators. That kathy is looking at, which essentially brainwashes investors into thinking that inflation must continue to accelerate. The first indicator is used. Car prices, the manheim used vehicle value index, has been used as a tracker for used car prices by economists and financial analysts for decades.

This index spiked up significantly during the pandemic, but recent numbers are showing that the bubble may be bursting soon. The index previously increased at a 60 annual growth rate at its peak, but prices have recently begun to decline at 1.2 month over month. That is a major turnaround, which is a signal that perhaps inflation is more transitory than people might think. Consumers have begun building their own inventory of used vehicles, and this inventory momentum can't keep up its pace forever.

I think this is the most fascinating part of what's going on in the economy. Right now, the mannheim used car index has been screaming. I think the prices of used cars at their peak had increased on a year-over-year basis, something like 60 and that was adding to the cpi. Well, very interestingly, we've had a few reports now that suggest that the bubble was in used cars and that it might be bursting.

We can see this a few ways on a year-over-year basis now used car price used. Car sales units are falling they're down four percent uh november to december. They were flat, but year over year, that was down uh four percent we're seeing prices finally start to fall. They were down 1.2 percent month to month again annual.

That's a big decrease uh month to month, annualized roughly 12 on a year-over-year basis, they're still up 46, but they have started to fall and what tells us that they will continue to fall and mind. You they've had a disproportionate impact on the cpi. What what tells us they will continue to fall is now an inventory buildup in the used car space. Normal uh inventories for used cars are, i believe, 43 days now they're at now.

They are at 54 days so well above average, and i believe at their lows. They were in the 20-day supply range uh. Now many people are looking at the hike in used car prices and they've probably been thinking about selling that car and that extra car, maybe that they bought to avoid mass transit during the corona virus. If they see prices coming down, they probably will move a little more quickly.

The second indicator that kathy is watching closely is consumer sentiment. Consumer prices are increasing at an extremely quick rate, but that doesn't necessarily mean that there is high consumer demand. Inflation is mainly being caused by low supply rather than high demand. Supply chains are failing to meet the existing consumer demand, but that demand is already starting to fall.

Retail unit sales are only increasing at a rate of 0.3 month over month, which is not in line with a consumer price increase of 0.77 month over month. This means that the spending power of the consumers is not in line with the price increases. That sentiment is perfectly demonstrated by the university of michigan's consumer sentiment index, which is rapidly dropping to new lows. Consumer sentiment is down to levels that we last saw at the depth of the coronavirus, both in november and december.

Now that's a very important part of the time of the year for the consumer to be feeling unconfident, because it's the biggest selling season of the year and so that we believe has become a problem. We have numbers for november retail sales were down 0.3, i mean they were up 0.3 percent, but when you take inflation out, what did real spending do so? What? What? What was unit growth in retail? It was down 0.3 percent. If you annualize that that's about three and a half percent at a really important time in the year, if you retail sales are mostly goods, if you add in services, you see that real consumption in total goods and services uh was flat again very important time of The year and a time also, when we thought this pent-up demand for services would cause a burst in service consumption. We didn't see it so that that is one indicator.

Saying us telling us something is not right out there. In addition to the used car bubble popping and consumer sentiment weakening the us, gdp is also pointing towards a massive build-up in inventories: the gross domestic product or gdp measures, a total amount of goods and services sold in the country. The u.s gdp has been increasing recently, which sounds great on the surface. However, the entire gdp growth was from businesses purchasing new inventory that isn't even being sold.

Wholesale inventories and retail inventories are accounting for the entire gdp growth, which has serious implications. If businesses are building up their inventory, that is not being sold, then prices will have to decrease uh in the third quarter of last year. Real gdp was up 2.3. It was a big disappointment relative to expectations, but what the headlines did not feature - and i and still are not featuring - is that practically all of that growth went into inventories, it wasn't sold real final sales were were up a tenth or maybe two tenths, so even In the third quarter now remember, that's reaching back to to june uh, even in the third quarter.

Inventories were starting to build at a time when everyone was talking about supply chain problems, and i think what we're we were beginning to see is the consumer getting quite upset that necessities, the prices of necessities uh, were escalating and destroying purchasing power uh. So so that's interesting now, what gets even more interesting is watching the inventory numbers in the fourth quarter. Uh wholesale inventories in october were up something like two and a half percent two to two and a half percent. Now, that's month to month, that's not year over year, annualize that and we're talking about 25 to 35 percent increase in inventories.

Remember this is when supply chain issues were causing all kinds of shortages and then again in november, wholesale inventories up 1.2 percent, again double-digit rate annualized part of the reason is consumption was, was not playing ball and then you look at retail inventories in november up two Percent, that's month to month, annualized annualized, 24 plus uh. So this is this is something i don't think the headlines have captured. You might be surprised, uh to hear it as well. The last important metric that kathy is watching is the purchasing manager's index or pmi.

In short form, the purchasing managers index is a survey done by top purchasing and supply executives in the country. This index recently declined by almost four percent month-over-month, which is showing that the purchasing power of consumers is rapidly declining and the other december statistics that we got besides autos are the pmis uh, the total, pmi and pmi for services. Both of them came down and prices paid in the purchasing managers index uh came down a lot more than uh people were expecting uh. It was, i think the expectation was somewhere around high 70s 80.

This is a diffusion index. Instead, it was 62. now that still means prices are up because they're still above 50, that diffusion index uh, but coming down, we think pretty fast. We've talked about many indicators showing that inflation could slow down in the future if those indicators are overcome by other factors.

Like a continued supply shortage, ark's etfs could easily crash even more. However, kathy definitely has a lot on the line and she clearly has a lot of conviction in ark's recovery. She actually recently disclosed that over half her ira is currently an arc, invest so she's. Certainly a skin in the game.

I want you to know that we're in there with you between the company and arc funds, which uh are more than half of my ira um, and the the uh significant potent uh percentage of my total net worth um we're all in and my conviction. Uh couldn't be higher uh that the innovation that has been evolving and was accelerated coming out of the coronavirus crisis is unstoppable and the convergence between and among the 14 different technologies that we are researching uh, that they are on that convergence is underway now and is, And is causing and will continue to cause explosive growth really the likes of which we haven't seen in our lifetimes, so there you have it why arc invest, keeps crashing and what will be necessary for arc to rebound. Let me know if you think kathy is right about her short term predictions. Are you selling, holding or buying arcs etfs? If you enjoyed this video, please hit the like button and subscribe and i'll see you in the next one.

.