Okay folks, so we've got two big things to talk about today. Number one, we need to talk about why exactly stocks are selling off so aggressively, why tech stocks are being hit the hardest, and how this is kind of giving us some Deja Vu flashbacks. Number two: we need to talk about the latest round of Kathy Woods bold predictions and what she thinks is going to lead up to a growth sector rotation. Cathy Wood making a bold prediction.

Who would have thunk that? But I think you're gonna like what she has to say. What the heck is going on out there? Why is the market so skittish? particularly around growth stocks? But we are looking forward to the next rotation, Uh, in the stock market. And we do think it will be back towards, um, the amazing growth companies that are going to transform our world. And before we get into all of this, the only thing that I ask of you in return is that you hit that ravishing like button.

And also don't forget to subscribe either. You look at the concentration of the S P, you have the most red coming from the tech sector, and big tech communications. you have consumer cyclicals holding up somewhat. Besides the Amazon, health Care has taken a big hit, you have parts of the financial sector like banking insurance holding up somewhat.

Consumer defense somewhat red. The only thing that's really poignantly up today is the energy sector because energy prices are seeing huge inflation right now, leading energy and utility stocks to the green. You also have railroads in the green as they're taking on a lot of demand with the supply chain. right now.

Meme Squeezer saw outflows today net across the market. The product squeezer was one of the ones that I had high expectations for this week. Despite some of the fear and fud in the market because of how well it performed last week and the overall setup that we explained and honestly, based on how damn red it was today in the market, it held up pretty damn well and actually went up like 15 intraday before the company decided to do a little impromptu offering and derailed it. But that aside, I would say that if you're trying to follow a retail squeezer, you're going to want to wait until you get risk on days.

and even during the worst of selloffs, you still get risk on day. So we'll continue to watch those. and you definitely want to have a lot of the main squeezers in your arsenal to play on days when the market decides. hey, we're going to throw a lot of capital at the direction of Meme Stocks.

But for the overall market, I mean very, very similar vibes to what we saw in late February and March of this year, similar to the inflation trade that we saw where people are panic selling, tech people are kind of holding bigger mainstream stocks and value sectors. this time around, inflationary concerns are more supply chain based than they were back in Q1 and Q1 people were anticipating a massive, massive, massive economic boom that increased consumer spending to insane levels that would persist throughout the entire year and into 2022. Now that we're here, we did see huge increases in spending during the Q1 and Q2, but then because of Delta and because of a lot of the supply chain concerns, you started seeing that go down. And now we're in the situation where supply chain concerns are just so so so so bad that it looks like that persistent inflation around supply chain concerns is going to withstand throughout the rest of the year.

Back in February, you were in a situation where people are anticipating inflation based around economic growth. Now, people are anticipating inflation based around supply chain issues and lower economic growth. You also have more focus on China and the Fud. Over there, China's been cracking down massively on huge, huge industries and sectors of their economy and sectors that impact the rest of the world.

If you're looking at what's rattling in the market right now, you can have your pick. You have pricing pressures that are out of control and a lot of incredibly important supplies in labor. You have fed tapering on the horizon. You have stalemates in the government.

You have heightened fear in China. With a government over there that moves very, very quickly, but not in the direction you'd want them to be moving in. and you have general uncertainty around this inflation situation. And I think that a lot of analysts right now are looking at this and saying, hey, We've been hearing this inflationist transitory argument forever and we've talked about it a lot on this channel, and obviously it is transitory.

Eventually this is going to get under control, but now people are looking at it and saying, hey, wait a second. These supply chain concerns are very, very persistent. This could take another quarter or two to really, really start getting under wraps when it comes to chips. Specifically, you're starting to see some of the big dogs like Elon Musk say, hey, in 2022, this is gonna be behind us, but there's certain parts of the supply chain that are gonna take time to heal, And until they take time to heal, you have to ask yourself exactly how far this inflationary trajectory is going to go.

Inflation around economic booms and spending on the consumer side has been largely transitory as those things have both gone down. But inflation coming from supply chain has continued to be very, very stubborn and very frustrating. In the words of Fed Jerome Powell, who I should warn you some say is a very, very dangerous man. Dangerously lucrative when putting on the gas pedal, but dangerously devastating when hitting the brakes.

And keep in mind, a lot of people like to ignore the direction of the market, but the direction of the market means a lot for literally any stock that you're trading or holding. can't fully understand why your stock's moving without understanding the context of which it's moving it at the end of the day, folks, everybody wants to be in a bull market, but you need to allow the market room to breathe. I like to tell myself, charlie, if you can't take the breathing in between runs, then you don't deserve to participate in the race. And more importantly, so, if you're going to participate in the race, then you have to be able to acknowledge that the best time to exploit opportunities is when the rest of the competition is breathing and standing on the side of the race.

That's when you start speeding up and you start exploiting. That being said, in terms of the bigger context, this hasn't been really a full breath. This has just been like the starting of a breath like the before. The few weeks back on the previous dip in the S P, I said publicly, hey, in terms of capital efficiency, I would wait until you get a bigger dip.

And of course we had some folks saying charlie, stop with the fearmongering. You said you want us to keep cash on the sidelines. That's terrible. But at the end of the day saying you want to keep cash on the sidelines, that's not fearmongering, It's Capital Management.

Can't call yourself a discount chopper for buying a stock that's down two percent on an overall market that's down two percent on the day. Sure, if the market's down two percent, some stocks are going to be down five or six percent, but if there's another down two percent day, then those stocks are probably going to go down another five or six percent. So my take is, unless you have unlimited funds, don't buy the dip unless you see actual discounted opportunities, Because if you're too aggressive during the beginnings of a dip, then you're not going to have any funds left to be able to buy it at much better prices. If you're trading and you want to exploit some of the short-term profit making opportunities when you have a down day and then the next day rebounds fine.

But if you're talking about long-term trades, you want to be very, very cautious in terms of being too aggressive with every single down day. Okay, Kathy Woods So she gave a big presentation on her thoughts on the market condition. She released it on her channel. You can go to the Arkanvest channel and watch it yourself if you want to see the full video, but I just want to talk highlights and my opinions on her thoughts.

Let's start with supply chain. So she really hammers on this idea that the big issue that is being overlooked is not so much that there's too much demand for limited supply and that supply hasn't been able to catch up because of all the factory closures during the pandemic. She seems to think that businesses and households have been pre-buying and essentially buying two to three times what they've needed in order to stockpile up on a lot of the inventory, basically buying needed goods out of fear of future shortages and in doing so inducing short-term shortages. She makes the argument that a lot of the missing inventory that we're looking for is already in businesses and houses, and that once supply catches up, we're gonna have the reverse issue because if there's a lot of inventory in people's houses and in their businesses and their warehouses and their garages, then all of a sudden when prices start coming down and down and down, they're gonna be sitting on inventory losses.

And if you're a business that stockpiled up on materials for the next six months to a year and you bought the inventory at record highs and then it's coming down. you may decide to go ahead and sell it in order to prevent a loss and then buy it back at lower prices, but selling it is going to cause the price to go down a lot faster. Now, that being said, I think that sometimes she talks in too broad of terms. You certainly don't see excess inventory in a lot of sectors, like, for example, cars.

There's not an excess, a number of cars or trucks right now. houses. There's not an excess number of houses right now, but I think that probably in terms of some of the sectors that she covers, this does have some truth to it now oil prices. So she talks about oil defying the fundamentals and getting into the region of breaking past 2018 heights, which now it has.

She says that oil can define logic for a long time like it did in 2008 when it went to record highs at 143 before tumbling down. But this time around, she says that she believes that oil has peaked at 2019 levels, which insinuates one we have a ways to go to get back to 2019 levels, both in terms of production and consumption. But at the end of the day, if her prediction is right, it would be capped at that level. And her reasoning is as follows: Number One: She believes that with China's push and aggressive push literally shutting down factories to some extent, I mean, we can argue about whether policies directly or indirectly are shutting down factories, but they're shutting down and some power is even shut down.

There's outages everywhere, but China's newfound commitment to reducing their environmental footprint she projects as being one of the big factors that's going to lower demand for oil. Of course, she also cites the shift from gasoline vehicles to electric vehicles. I think that there's definitely some argument for that, but I think that her time skill is a little bit too short term With that. I don't think that's gonna have such a short-term bold impact on oil prices.

Right now, the vast majority of car sales are still going to gasoline vehicles. I think that in the long run, yes, it's going to bring down oil prices, but definitely not in the short run. Now in terms of deflation, you know, Kathy Wood constantly hammers this point that in the long run, we're going to have deflation. Everybody's panicking about inflation.

But in the long run, the bigger problem is deflation because a lot of these innovative companies are going to be exponentially increasing the productivity of the labor force and of the materials that we use. All of which is going to bring cost down across the board. And in terms of specifics. in her latest video, she cited artificial intelligence training costs going down 68.

She talks about rent, saying that hey, rents may be going up right now, but in the long run, because a lot of people have migrated out of major metropolitan areas and into the suburbs into less populated areas in the country, you're going to see a lot of rents go down as demand goes down. I don't know if I agree that that's going to be a net negative to bring prices down consistently, but it does have some downward pressure. I mean, people have moved out during the pandemic out of a lot of major cities, and we haven't really seen a big migration back to any huge, huge, noticeable extent. She also believes that the skyrocketing costs of labor are going to be mitigated by productivity gains.

For example, maybe you have to pay an employee more, but because of innovation, they produce a lot more for you, returning you more value per dollars paid, so it comes out net positive for you, the employer. Again, one of those talking points. It's almost certainly true, but the question is over a short term time horizon? I don't know, I don't think so over a long term time horizon, definitely, but it all depends on your perspective of how long you're willing to buy and hold, right? Okay, now, in conclusion, at the end of the day, I think that the takeaways with Kathy Wood is that she always makes big, bold predictions, and sometimes it's easy for people to think, oh, she's talking about deflation. Oh, she's talking about innovation.

That means that it needs to happen within the next quarter, needs to happen within the next two quarters. Or she was wrong. But in the short term, a lot of where her fun trades at, a lot of whether her predictions are coming true or not are based around things that are outside of her control in the present. For example, where the Fed decides to go in terms of the level of tapering when he decides to raise interest rates, how long it takes supply chain bottlenecks to really ease up, and if inflation numbers do run rampant a lot longer than expected because of these bottlenecks, this could cause the Fed to get a lot more aggressive in terms of intervention and start really, really tightening that monetary policy, which would cause her already largely correcting Growth Fund to go down dramatically.

She's not going to say that because she's the one managing the fun. She's not going to say, hey, well, you know, if he raises interest rates dramatically, obviously, growth strategies are going to go into a deep, deep bear market for longer. But in the back of her head you know what she's thinking. She's thinking, hey, well, it doesn't matter because in the long run, that's what I'm focused on.

A few quarters isn't going to make a difference for the adoption of electric vehicles. A few quarters isn't going to make a difference for next-gen Internet technologies or Cryptocurrency or Artificial intelligence. Sustainable energy, you name it all of these things. It doesn't really matter what the Fed decides to do in the long run, it doesn't impact them.

So in totality, I think that if you have a short-term mindset and you're not somebody that has conviction in a lot of these industries, then you could always. You can always criticize Kathy. what are growth strategies? But if you have that long-term perspective, you kind of appreciate the cycles because you're like, hey, wait a second. So I built a lot of conviction in this.

I put the work in. I really grew a passion for these industries and then every time it had its cyclical sell-off when everybody said it was shite, then I took advantage. I bought the dip and I stayed patient. Haitians pay is Huge for the growth sector.

I mean, if you look at the past of a lot of the mainstream growth stocks that are at huge levels right now, a lot of them did nothing for years or went down for years and then went up huge. Now I think that the trend is actually a lot faster than having to wait years. I think that you know you're probably a few quarters in for the growth sector to start coming back to a large degree. Maybe you do need to see a little bit more of a breath in the broader market to get on the right train track with that.

But however far away that is at the end of the day, Kathy would have saying wait a second. A real danger is not being aware of these emerging technologies in innovative industries. Anyways, folks that caps off the video. if you have any questions, feel free to reach out to us below or join us on zip trader Circle if you'd like to learn how to trade.

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