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I think we're going to uh start talking about deflation more and more and I believe interest rates are going to come down more than people expect until this productivity driven boom is obvious. Hello everyone, this is BTC Insight and welcome to yet another deep dive into BTC Insight. Before we jump in, make sure to hit that like button and subscribe if you haven't yet.
You won't want to miss this. To understand where Wood thinks we're going, we have to look at where she says we aren't. Many critics compare today's AI excitement to the dot bubble of the late '9s. Wood argues the environment is actually the complete opposite. In the late '9s, when Jeff Bezos told shareholders Amazon would lose massive amounts of money to chase a great opportunity, the stock skyrocketed.
Investors threw money at technologies that weren't ready and costs that were too high. Today, if a company announces massive AI spending that threatens short-term margins, they get hammered by the market. Now, algorithms are assuming that AI is going to destroy industries wholesale. Um, this is not what happened during the late 90s.
And I will get back to your question. uh in the late 90s when Jeff Bezos said, you know, we're going to invest so much more than we expected because this opportunity is so great and that means we are going to lose so much more money uh than you shareholders expected us to lose. Uh the stock absolutely took off to the upside.
Uh any company saying that today uh is getting hammered. So we are in a completely different environment. Your question was um the you know the the various parts of the administration being united. You mean when Kevin Worsh comes uh on board right now uh of course the Powell is not at all aligned with Trump.
Um you mentioned a dollar devaluation. I don't think that's what's going to happen. uh and uh Treasury Secretary uh Bessant who knows all about currency markets and knows how important they are is saying uh a strong dollar is in the interests of the United States. Now many people look at what happened last year the dollar went down quite significantly.
But if you look at the dollar in a long-term context just go back to the early '7s and see where we are now. uh you will see that uh the dollar again this is relative to other currencies not relative to gold. Uh the dollar is um at closer to the upper end of the range with the exception of the 85 um uh blowout of the dollar uh than it is to the lower end.
And I think the policies of this administration suggest to us return on invested capital here in the United States should go up relative to that in the rest of the world. What do I mean by that? Uh we've got massive deregulation. Uh this this government understands how much we have hurt our ourselves relative to China with uh thicket of regulation and they're trying to peel those away as quickly as possible.
Uh we got a tax cut where for the first time in our tax history uh for the next three years as long as the construction of a manufacturing facility starts by the end of 2018 uh during its first full year of or during its first year of service um the company building that facility will be able to depreciate it not over 30 to 40 years but in the first here.
So massive tax refunds coming back to reinvest. Um where we are seeing tax cuts for the consumer to some extent certainly at the margin uh in you know tips and you know o overtime, social security uh and uh autos. So uh I think we're going to see massive refunds here in the first quarter. Uh and I I think that uh the the the the um rolling recession that we've been in for the last three years, uh PMI being down negative for saying manufacturing's been negative for the past 3 years.
We've seen housing and got a terrible number today, 3.9 million. We're back to the lows in existing home sales. Uh I think uh we are going to shift from that to a rolling recovery into a productivitydriven boom. Uh and I think uh one of the things that um is becoming obvious when you look at how they revised the employment numbers down by 860 something thousand over the last year.
Um if in doing that what they effectively said was okay given this level of GDP and we're more sure about GDP because of national income accounts and so forth um it must mean that productivity was higher last year if we revised employment down like that which in turn means that real GDP growth was higher and inflation was lower.
Uh they got the mix wrong in the GDP accounts. I think we're going to uh start talking about deflation more and more and I believe interest rates are going to come down more than people expect until this productivity driven boom is obvious. Um so I actually think the US from an investment point of view is going to do very well over the next few years.
You wouldn't know it from the last few weeks. Um, but I think there that we're in the flip side of the bubble. We are absolutely in the flip side of the bubble. Uh, you know, there that that investors just threw money at the bubble when the technologies were not ready and the costs were way too high.
Now, we're in an environment where we're ready for prime time with all of these technologies, robotics, energy storage, AI, blockchain technology, and multiomics technology. Uh, and so I think we're going to have a boom, and the US is going to uh is going to do very well. Bitcoin is a hedge against inflation and deflation.
Um, because uh the chaotic part of this is and and it's ripping through the markets now. a lot of um uh a lot of traditional industries and and and companies uh you know being brought the whole SAS space uh the disaster as they're calling it um we think there is merit to that particular one but I think you're going to see disruption all over the place um because the five innovation platforms that I mentioned are going to disrupt the existing world order and what does that mean If these technologies are so deflationary, it's going to be tough for the traditional world that's gotten used to sort of the, you know, the the two to 3% inflation um to adjust uh particular they'll have to embrace some of these technologies faster than expected.
Uh so the you know the idea of counterparty risk I think um is beginning to surface. Uh we've we've seen it with first brands. We've seen you know private equity and uh private credit especially is where there have been a lot of excesses. Um SAS they they are too exposed to that. You know are we going to see counterparty risk uh manifest more broadly?
If so, Bitcoin doesn't have that problem. Uh, and so it is a a good hedge against deflation as well as inflation. Central to the ARC 2026 big ideas report is a concept called convergence. This is the idea that technologies no longer exist in silos. AI powers robotics. Robotics transforms energy storage.
Blockchain secures them all. Wood notes that even Elon Musk has recently adopted this convergence language. She believes Musk is intentionally letting Tesla run as a standalone entity for now because the robo taxi revolution is at a breakout point. She compares Tesla's current 5-year trading range to the manufacturing hell of years past, a long base that is prepping for a massive breakout as it competes with Whimo.
I think uh that ultimately he could and and and he started we have been using the word convergence for a long time in I'll give a plug to our big ideas 2026 and you'll see a section by Brett Winton our chief futurist called the great acceleration um and uh this and you'll see a sphere in there showing how all these techn technologies are converging one with another.
Uh and at one point in the last I'm going to say 6 weeks Elon said you know what I think uh I think my comp my companies are are convergence stories. So we thought it was interesting he used that word. Um so SpaceX XAI does not surprise us at all. Uh, I think he's going to let Tesla run here for a while.
Uh, because the robo taxi revolution is just beginning and I do think he wants uh he wants that story uh to become very clear to investors uh and and it will he doesn't want to you know combine with anything and and confuse confuse what's happening here. Uh and as you know we have uh very big expectations for robo taxis.
We love it that uh Tesla and Whimo are competing against one another. And uh we think you know the the stock Tesla stock if you look at it it's been in a very large trading range for the last 5 years. And I remember the last time I said that was when Tesla was going through manufacturing hell and there were people out there saying Tesla's going to go back bankrupt.
There's no demand for these things. Uh it had been in a very wide range for 6 years back then. And I said, you know, the history of long bases like this is they either break out or break down. And uh we very much think uh Tesla's getting ready to break out again and then uh Elon will have more degrees of freedom.
What's happening in in the last week or so in particular reminds me of the early days of CO. you know, nobody knew what to do and so algorithms just sold everything off except for, you know, the safest stocks, the most cashrich uh and cash flow generative companies. And I remember as I was I I was looking at it, it's an algorithmic move taking place in the market and causing a bit of a downward sp spiral uh in innovation related stocks.
Uh now unlike co uh we were probably not going to have massive fiscal stimulus in the way that we got back then. So we're not going to have come out of this with a big boom. but they're selling the baby with the bathwater again. And so it gives active managers uh an opportunity to in our case concentrate towards our highest conviction names.
Um, I think the biggest risk out there is that Powell, who will only be in place until May, uh, that Powell is not and the other Fed board members are not, uh, understanding the deflationary undertoe that is beginning to take place here. And um and they will not uh because they're not looking at the right signals uh and because they're looking at government data which is all you know wrong and and and based on the industrial age um they're they they could miss this and uh will be forced into a response when there's more carnage out there.
I think that's what I'm uh worried about right now. Uh I I think though I think this is the opposite of the bubble tech and telecom bubble. Uh right now we're seeing all of the beneficiaries of AI and every stock in our portfolios we have been looking at from through the AI lens uh for actually the last five to 10 years.
And so we believe we have the beneficiaries in our portfolios, but there's so much confusion out there on AI that, you know, it's it's baby out with the bathwater as I just said. And then you have this overlay of the policy makers once again being late. You know, a lot of people in the crypto market and in our markets are technical analysts and they they use the 200 day moving average, 200 week and they see it break.
So, you know, there's there's an algorithmic uh technical move taking place here. And you know, as I always say to our team, truth will win out. And we definitely are on the right side of change. And we believe we are in the right companies uh that will um benefit mightily from the not only a the AI revolution, but the convergence among these technologies.
When you think about the way traditional research is set up in traditional asset management, um it's set up incorrectly to understand what's going on here. It's set up by sector or industry or or subindustry. Many companies have five healthcare analysts, five consumer analysts. Uh in the world of innovation, the right way to look at the world today is by technology.
under uh involved in those five platforms are 14 different technologies. We have set up our analyst responsibilities uh by by technology. So they are experts in a given technology and they are generalists when it comes to sectors and industries because these technologies are converging and they are going to impact every sector, every industry, every company.
Kathy Wood's message to investors is clear. The world is looking at the economy through a rear view mirror. Traditional asset management is siloed into sectors. Healthcare, consumer, financials. But innovation doesn't care about sectors. Arc Invest has restructured its entire research team to be experts in technologies, not industries.
Why? Because a breakthrough in AI will change healthcare just as much as it changes finance. That's it for today's look into BTC Insight. If you enjoyed this deep dive, hit that like button, drop your thoughts in the comments, and subscribe to stay on top of all the latest insights. Keep questioning, keep learning, and we'll catch you in the next
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