What Cathie Wood JUST Said

hey everyone kevin here in this video

we're going to talk about what kathy

wood just said so take a look at this

kathy wood just said that in november we

learned that retail inventories rose

more than two percent the fastest pace

is since the 90s and she's right when i

look at the average of retail growth on

a month-over-month basis the average

over about the last 20 years is about a

one-third percentage point increase in

inventories we had a point eight percent

here in 2016 one percent in 2020. we had

a 1.3 percent over here in 2013. another

1.3 percent in 1999 somewhere up here

but the point is two percent is is a lot

she's not wrong that that is a a large

bump what we're going to do is we're

going to keep breaking down her response

here to see what we think about her

conclusion from all of this do keep in

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will go up again but anyway let's let's

see where kathy's going with this she's

suggesting that retail inventories rose

more than two percent the fastest pace

since the nineties at the same time

imports are up four point seven percent

and exports dropped two percent okay so

basically we're bringing more stuff to

america we're sending less stuff out

this kind of makes sense europe is in a

big slowdown uh the asia-pacific region

is doing nowhere near as well as we are

in america uh in terms of at least

keeping the economy booming uh and uh

unfortunately you know kathy doesn't

mention this here uh beyond just

mentioning that hey retail inventories

are up and consumption is flat now she

does use the inflation-adjusted phrase

for inflation by suggesting that real

consumption is flat and that savings

rates have declined but really what

she's setting up for is that hey if

we're bringing more junk in and we're

we're not getting it off the shelves

then prices are expected to come down

which could create deflationary

pressures right but before we keep going

with what she mentions in her tweet i

think it's worth looking at a little bit

of data and seeing is kathy on the right

track here is she on to something

or

is she totally wrong or is there maybe a

little bit of a middle ground let's look

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for just one dollar so here are some

articles that i i pulled up with some

research uh and here's one from neiman

marcus suggesting that

their their earnings margins are

substantially higher than what we've

seen in the past

and this comes from their october 30th

report which does indicate that

consumers are willing to pay more money

we saw the same thing at nike in the

nike earnings report that just came out

about a week and a half ago we saw that

consumers were willing to pay more money

that consumers were not demanding

markdowns and folks we see the same

thing at chipotle saying that hey their

input costs aren't necessarily going

up that they're not having this cost

pressure but still what are they doing

they're raising the prices because

consumers are willing to pay for that

but maybe kathy's right because what

happens if consumers stop spending right

well let's see we we have the

reiteration here that kathy is right

that retail inventories rose two percent

the most since 1992

wholesale inventories rose 1.2 percent

and the trade gap is widening so who

knows maybe kathy read this article here

u.s merchandise trade gap widens to a

record as imports surge okay i know that

well when i say i know i think i'm like

95 confidence kathy reads bloomberg and

behrens because a lot of times we see

the same articles and then i see her

tweets but anyway kathy didn't mention

this

which i think is worth noting take a

look at this

foot traffic at t.j.maxx marshalls rose

14.7 and 16.2 between december 1st and

christmas day so yeah inventories went

up in uh in in november but compared to

2020 we actually have more foot traffic

during this covet search like despite

omicron which is mostly a nothing burger

we know that even though the market was

fearful for a while and there was a lot

of fun about it we know it was mostly a

nothing burger which hopefully it stays

that way knock on wood right we don't

want it to turn more severe but or

evolve into some other crazy variant but

anyway same thing is true for burlington

coat factory 17.5 raw stores 22.2

so last

winter yeah we had more potential

concerns because it was our first winter

going through covet but still you had

more stimulus then now you actually have

potentially less stimulus less

unemployment money you do have the child

tax credit but that's coming to an end

and and like kathy said consumer savings

are going down yet foot traffic is up

during the omicron surge in fact if we

look at the economist we could see the

following here that yeah

travel to workplaces is falling about 25

in america but retail and recreational

activity has continued to recover in

america as well as in places like the

united kingdom and germany so according

to

mobility data people are still out there

spending and look at this this right

here is a piece from bloomberg

showing a comparison of foot traffic and

shopping uh at specific stores and the

uh black box here the black circle is

comparing 2021 to 2019 and the little

blue circle compares 2021 to 2022 or

2020 rather so any negative you have

over here means you're getting this sort

of decline in traffic so you're getting

a little bit of a decline in traffic at

walmart and at best buy

but target is freaking kicking butt

costco's kicking butt and bj's wholesale

has recovered and is is doing quite well

as well so

you're seeing this this uh

overall

a slight decline from 2019 but we're

still doing pretty dang good with our

foot traffic which implies that spending

could still be strong now this is in

contrast to the consumer sentiment

report now consumer sentiment always

seem seems to be bearish of the

sentiment of the day and that's what she

mentions here next according to the

university of michigan their consumer

sentiment which she believes is the best

survey on the consumer consumer

sentiment fell to its lowest level

during november and december now

personally i believe that's because

people are freaking out over the federal

reserve ending uh their bond buying

their taper process starting their taper

process eventually going to raise rates

and the market got kind of crappy there

at the beginning of december and at the

end of november

and consumer sentiment always seems to

drop every time you get fear about

either the omicron variant the surge we

saw in europe in november omicron coming

out uh in early november and then into

december so not a surprise in my opinion

that sentiment would fall but but again

we don't really see that kind of

adjustment here to kathy's logic and so

i'm a little bit worried that kathy is

thinking we're definitely going to have

deflation because what she's saying is

look retail inventories went up two

percent at the same time gdp went up two

percent but spending didn't go up two

percent that means everything went into

inventories and she's basically saying

we might be fighting deflation next year

we've heard this argument before i'm

going to break through this a little bit

more here but i want to just give you a

little preconclusion here

i'm worried

that

kathy isn't necessarily looking at the

uniqueness of businesses purposefully

surging inventories because of the

supply chain worries that we were not

going to have stocked shelves there have

been a lot of fears that okay now maybe

we overstock now it's time for discounts

but in terms of what we're seeing in

mobility data and the consumer actually

spending out there

most signs point to a continuation of

spending now jp morgan did notice a

slight dimension slight decline in some

spending globally but that could also be

as a result of a slowdown and lockdown

quite frankly in europe but in the

united states i don't know i want to ask

you it seems like things still feel

pretty hustle and bustle out there now

i'm not suggesting that kathy wood is

wrong but i don't think things are going

to be as extreme as kathy says here's

what kathy says might happen

she believes that a lot of what's

happening right now reminds her of y2k

where basically you had tech companies

run up but innovative companies run up

but they ended up selling down because

they were not able to innovate yet then

she believes we're going to see the

opposite of this what we're going to see

is we're going to see deflation in

consumer products and appliances and and

non-innovative companies and we're going

to see a lot of that business go to

innovative companies and in other words

she believes that her book of business

is going to do very well going forward

and that's because during times of fears

of potentially inflation going away and

fears of recession people are going to

go for growth at all costs and if people

go for growth at all costs they'll go

back to innovative stocks and the

company she's investing will do well

again fine and she ends by saying those

investors should be rewarded handsomely

maybe maybe

but

i think there's a middle ground here i

definitely don't think that we're going

to hyperinflation i think inflation is

going to inflict down but i don't

actually think we're going to go as far

as seeing deflation in 2022 or quite

frankly a risk of a recession if

anything i think the bull market is

somewhat just getting

well i shouldn't say just getting

started but i think this real like the

real fruits of the efficiencies that

we've built into so many of the

businesses and companies that we've had

whether it's supply chain efficiencies

repairing the supply chain crises

employee efficiencies by laying off a

lot of people and then hiring back new

folks new blood so to speak uh retaining

excellent talent i i think we're going

to see some incredible profit margins

that company so i'm very bullish really

more broadly so i think the summary out

of all of this is i don't think that

kathy wood is necessarily wrong we know

inflation is going to go down but i

think she's going a little too far by

suggesting we're definitely going to

deflation by not considering some of the

other aspects as to why we saw this

retail uh inventory surge and the fact

that we still see shoppers out there

like crazy despite the fact that it

almost right now feels like we're at

peak omicron and so those adjustments

not being part of her view

soften her view substantially in my

opinion so again i'm not thinking we're

at hyper hyperinflation but i also don't

think we're at this kathy wood we're

going to deflation only innovative is

going to win i think we're going to have

somewhat of a middle ground and

personally i'm pretty optimistic about

2022 which i know is hard

when when there's so much of these uh

we've been having so many of these false

rallies in full start

which uh false starts i should say to

rallies hopefully hopefully the rally

that we're seeing today continues for

example rk is up 4.7 today i hope this

continues but we've seen so many false

starts of arc go from 90 to 100 and then

back down i hope we don't have another

full start and some more red over the

next few days but i'm optimistic for

2022 long term no matter what so i'm

excited all right folks these are my

thoughts thank you so much for watching

this video my thoughts on what kathy

wood just said and we'll see in the next

one thanks again goodbye