Michael Burry *vs* Cathie Wood: MASSIVE INFLATION Crash.

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who will win between kathy wood and

michael bury folks in this video we are

going to talk

about the potential pathways for

inflation

versus deflation and what it means for

our investments we'll also compare

what some investment strategies might

look like for the two different

scenarios but first

let's get into what the two different

scenarios are

okay folks it's very simple on one hand

you have

kathy wood legendary investor over at

arc invest with over 40 billion

dollars of assets under management fund

has

performed phenomenally last year with

returns in excess of 130

of course this year has been a little

bit of a rougher start

and a lot of this has to do with

inflation expectations

see kathy wood invests in a lot of high

future growth companies companies that

are the companies of

10 years from now not of yesterday or

today

that means we're projecting and

forecasting earnings in the future

which those earnings in the future

become less valuable when there's

inflation

see if there's zero inflation ten

dollars today is basically the same as

ten dollars ten years from now

if there's no inflation but if there's a

lot of inflation then

ten dollars today is worth way more than

ten dollars ten years from now

because that ten dollars ten years from

now might only be worth

five dollars because inflation has worn

away

how much that money can purchase that

bill is still ten dollars

but maybe if a coffee now costs you ten

dollars instead of two dollars

at mcdonald's when you've had some

inflation

lack of or you've lost purchasing power

right so

where does kathy stand here well kathy

has not changed her strategy

at all kathy is stuck with high growth

style companies and we're going to go

specifically through her portfolio in

just a moment but kathy's belief is that

yes the federal reserve may have to

adjust

bond purchases within the next year to

two years

sooner than the market expects and this

bond

tapering or the government no longer

purchasing bonds might lead rates to go

up

general interest rates to go up and it

could eventually lead the fed to

increase interest rates for the market

in general discount rate fed funds rate

and then prices and equities might

suffer in the short term because of

higher rates and bond tapering as a

response to some inflation happening

however kathy's overarching principle is

not to be fearful

of inflation or rates slightly moving up

instead kathy is much more worried that

sure we might have some volatility

because of inflation now

but we have to be more worried about

deflation

see kathy believes there are two massive

forms of deflation actually

fighting modern economies one is very

natural and it's called technological

deflation

this is when for example i bought a 40

inch

tv thinking i was really brilliant at 16

spent the first two thousand dollars i

had on a 40 inch tv

now if you're going oh my gosh you spent

two thousand dollars on a 40 inch sony

bravia tv

they're only like 200 now bingo

deflation things become

less cheap and our quality the quality

of products goes up over time

and that actually introduces even

another form of inflation so you've got

technological deflation

and then sort of fork one is it's

cheaper to make things

so we can reduce prices as more

competition forces prices down

like that tv but beyond being cheaper to

make things

picture this the iphone unsubsidized

when the iphone 1 came out was about a

thousand dollars

you can get an iphone today also for

about a thousand dollars the iphone 12

uh maybe not the biggest one but you

could get a comparable iphone also for

about a thousand

dollars but a lot of folks say wait a

minute i don't need the thousand dollar

version

give me the 600 version and it does way

more than it used to do

and it's good enough for me so not only

has it become cheaper

to produce iphones but the quality has

gone up substantially

that's a two-folded style of deflation

price of

the same quality product went down but

then quality went up so high that we

don't actually need to spend that much

money anymore

on still having a very good product

whether that's a phone or a computer

or whatever so that's technological

deflation which kathy wood thinks is

going to be

probably the biggest drag on inflation

going forward she's regularly talking

about how the cost of batteries are

coming down and this is going to be

great for ev manufacturers

for today mentioned they expect their

battery costs will decline by 40

by 2025 this is technological deflation

and that outweighs inflationary

pressures

like burr money printing

see money printing a lot of folks say

like hey it has to cause inflation well

it does but to what level does it cause

inflation see inflation again reducing

our purchasing power

uh making the value of our dollar kind

of erode over time encouraging us to

spend it helps

us wash away debt there are fairness

debates around inflation

fed wants inflation around two percent

quite frankly we might be in an

environment where

without the fed or without modern uh

fiat we might actually be experiencing

regular deflation year after year after

year which tends to encourage

savers and not spenders it encourages

paying off debt

and not having debt which potentially

shrinks the size of your economy

which generally politicians and

economists don't want to see

so anyway the argument is we want some

inflation but not too much

and the money printing gets the sound of

the whole of deflation

but there's also a secondary pressure of

deflation that kathy wood talks about

and then we'll talk about michael bury

so the second part of deflation actually

has to do

with prices going down because the

legacy companies that

fail to adopt to modern times modern

technologies

have to start dropping prices an easy

example for this

that i'm just making up because it's not

100 true right now

is imagine five years from now you could

buy an electric car

for twenty five thousand dollars that

goes zero to sixty in two seconds and

has a 500 mile range

why would you ever buy a thirty five

thousand dollar

souped up hybrid that goes zero to 60 in

six seconds you wouldn't so if companies

don't adapt to where vehicles are going

and where cost curves are colliding

then what happens is those companies

selling older legacy products

oftentimes these companies by the way

having a lot of debt they'll

under the pressure of debt and the

pressure of being competitive be forced

to lower their prices

to basically get their crap off the

shelves that

in essence lowers prices so you have

massive deflationary pressures that's

the kathy wood

deflationary camp temporary inflation

sure

long term deflationary pressures and you

want to invest

for those sorts of pressures which means

investing for

long tech essentially all right

that's one side then you have michael

bury

michael bury believes no we are about

to have problems hit the fan doo doo is

about

to hit the fan why because

when the federal reserve realizes that

they have to

taper bond purchases because they're

over stimulating the market with too

much inflation

they'll start pulling back their support

and they might think they'll be able to

reduce inflation by just stopping

the flywheel of money printing or

slowing it down

but they might actually lose complete

control and inflation

might not sit at two percent or four

percent where it sits now year over year

it might go to five or six percent or

even

seven or eight percent and then the

federal reserve is going to be

forced to raise rates which we already

know and now

reference the interview that i always

reference sarah eisen's blunt question

to

jerome powell was hey jerome look if

you're wrong

and you have to control inflation you

know what's your principal tool you're

going to raise rates aren't you

jerome powell goes well yeah that that

is our principal tool so in other words

like don't worry knowing this picks up

on okay

so what you're saying is when you lose

control of inflation

you're going to jack up interest rates

that's going to jack up short-term

borrowing costs for companies

that's going to jack up interest rates

on any kind of variable rate debt that's

going to hurt

the commercial real estate sector or

anybody again with variable rate debt

that's going to hurt people with

consumer debt that's going to hurt

people with credit cards and variable

rates on their car loans or variable

rates on their student loans

we could potentially get pushed into an

economic oblivion

thanks to the federal reserve's money

printing and countries and central banks

throughout the world

printing about 25 of the world's

currency in circulation

which could lead to basically a mega

reset

or mega collapse greater than the 2008

recession

greater than the 2020 crash

and ultimately force companies into

liquidation

bankruptcies uh people losing their jobs

a

real severe drawn out depression

and then a slower cleaner leaner

recovery

so those are the two projections

for michael bury uh for inflation and

kathy wood

now let's go ahead and take a brief look

at

michael bury's portfolio and then let's

take a brief look at kathy wood's

portfolio

so let's go ahead and pull these up what

do we have here we have

michael bury's portfolio is about 8.3

cvs 7.8 in telecommunications

and then invests in things like

supermarkets pharmaceutical

companies iron and steel mills reits so

real estate investment trusts drilling

and oil

this is very very different from

something like newspapers very different

from something that you would see for

example at

kathy's ark and now my computer is

pinwheeling because it's concerned about

all of the inflation that's coming

but the good news is you could still get

two free stocks with weeble via the link

down below when you deposit just one

hundred dollars they will give you two

free stocks worth up to eighteen hundred

and fifty dollars all right let's go to

kathy's arc dot com

and over here if we go to combined

portfolio

you will see that kathy's portfolio is

seven percent weighted towards tesla 4.9

weighted towards teledoc and other

companies include square roku shopify

coinbase twilio

coinbase now at two point five six

percent exact sciences

zillow zoom unity spotify crispr

10x genomics twitter paleter docusign

uipath draftkings invite and so on and

so forth

very very very different investing

styles

for extremely different world views

so folks what do you think which side

are you on

either way i'd love to hear from you

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[Music]

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