A lot of investors are concerned that the stock market is in a bubble in 2021. In this video we go over Cathie Woods opinion on whether it is or not…
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📚 Chapters 📚
00:00: Is The Stock Market In A Bubble?
03:05: Will Ark’s Strategy Work In This Environment?
05:57: Value Traps
09:56: Concern & A Move To Cash
Recently in the stock market we’ve seen a trend of investors getting out of stocks and into cash. In-fact there is more cash held in money market funds, than there was in the great financial crisis in 2008. This means one thing that investors are concerned of the stock market being in a bubble.
2008 we had the housing bubble where a lot of people lost a lot of money, 2000 we had the technology bubble again a lot of people lost money, and what investors want to know today, 2021, are we another one of these bubbles? Let’s first see what Cathie Wood has to say on it…
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So she firmly believes that we are not in a bubble. Unlike the opinions of a lot of other famous investors, she thinks that the market justifies the current price levels.
And the key reason behind this is because of future growth. As she said, the seeds of this growth were planted way back in 2000. That’s where we started developing technology, learning the basics of computers, and phones, and the internet, and building businesses around that.
But as you heard in the clip, she thinks that investors predicted this too early, and that’s why we saw the technology bubble collapse in the year 2000. But now the seeds have grown into something stronger, where you can start building bases for businesses to grow on in the future. She thinks we’re going to be seeing a lot more potential Amazon type growth businesses, over the next 5, 10, 15 years. She thinks because of this type of growth, why the current prices are justified…
But also, you’ve got quite a lot of investors, particularly institutional investors who say Ark invest strategy worked well in during the strong bull market that we’ve had, but they don’t think it’ll work as well in these current market conditions… Cathy strongly disagrees with these investors sentiments…
(Insert Clip 2)
You know if we take a look at some of these big businesses of the past, and by that I mean the ones that have failed, they failed due to what Wood calls creative destruction. Blockbuster used to be a movie and game rental giant back in the day. But you don’t here of them anymore. Why because Netflix innovated so you can watch movies online, straight away, instead of having to go to a store and hire it. Netflix innovated and it left creative destruction of businesses like blockbuster in it’s wake.
Toys R Us. Do you remember how big that was back in the day? Now they’re filing for bankruptcy. Why, because Amazon innovated and now with a few clicks you can buy whatever toy you want.
So the point Wood and I are making is that when innovation comes, destruction is left behind. This is something that people often forget.
And according to Wood’s prediction, she said that 50% of the S & P 500 will be impacted by creative destruction.
Some of these giant companies that have been built on the current system are at risk in the future. Because we all know how quickly the future changes, and if you have big businesses that can’t adapt, well, they’ll melt away.
And this is why Cathie says, all of you who are criticizing my strategy, my think about your own strategy and how will it work in the future? You know are you sure Ford, or Toyota will have a strong business in 15 years, with the rise of EV’s. Are you sure Disney will be strong with the rise of Neflix. Will Intel be strong with Macs new M1 chips been used instead.
These are the questions that regular, institutional investors will need to ask themselves…
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