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And we believe that approximately 50% of S&P 500 companies are at risk of creative destruction. Some more, some less, but overall 50%. And now we see automakers scrambling, and we would say they are fighting for survival. Hi, I'm Steven and this is the "Solving the Money Problem" program. If this is your first time here, welcome.
If not, welcome back. So, in this video, we'll hear from Kathy Wood from Ark Invest with an urgent warning for investors. And honestly, guys, every time I use the words " urgent" and " warning" in a video title, I want to punch myself in the face. But that's the most accurate description of what Katie Wood wants to say to stock investors.
We'll hear her thoughts on the huge changes taking place, beneficial deflation, the future of the auto industry, artificial intelligence, contrarian investing, and the huge, inevitable destruction awaiting the stock market. So let's get started. By the way, since I know that many cryptocurrency enthusiasts and people who love freebies are watching us, today i cryptocurrency bonuses by depositing a new account on BlockFi, to get free cryptocurrency, use the link in the description.
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promotion from Stake, also via the link in the description. Let's get back to business. The field of batteries, battery systems are doubling, and we are now at the very beginning of the era of electric vehicles, so many more such doublings await us. Uh, those costs fell by 28%. So think about it. In the transportation sector, deflation is driving the electric vehicle boom.
The expected decline in battery costs is something that should be pretty obvious to people in the automotive industry, unless they're "asleep at the wheel," of course. But unfortunately, today there are still companies that plan to have less than half of their fleet fully electric by, say, 2030, which is 10 years away.
I'm telling you guys, if you hear from any CEO, president, etc. of an automobile company that they don't plan to go all-electric by the end of this decade, they'll be bankrupt before it's over. Remember my words. The cost of electric vehicles today is close to parity with cars with an internal combustion engine, but has not yet reached it.
Not to mention lower cost of ownership, lower maintenance costs, better performance , blah blah blah blah. The price tag has almost reached parity. If we look into the future and take into account the decline in battery costs, remember that the battery is the most expensive part of a car, by a huge margin, well, by a huge margin.
If the cost of this component continues to drop rapidly over time, it means that the price tag on electric cars will simply collapse, which will make cars with internal combustion engines completely worthless . Ask yourself: what consumers, even the dumbest of the dumb, would want to overpay 10, 20, 30% to buy a product that they know will cost them more to own, more to maintain, has worse features , functionality, performance, and the safety I recently talked about ( the presence of a battery pack , a low center of gravity, and a huge crumple zone because there is no engine in the front )?
I mean, there are absolutely no advantages to cars with internal combustion engines today, except for the price tag. This will soon change. And then, to be honest , you have to be a real idiot to buy a car with an internal combustion engine as a consumer. We see the same thing in industrial robots. I think they are about 25% ready.
Uh, we see AI training costs falling by 37% to 50% per year. So , artificial intelligence will penetrate every sector, every industry, every company. And those companies that don't implement it properly, uh, lose out in the competition. I would call that a huge understatement on Katie's part. They will lose out to competition, or simply be forced out of business by companies that implement artificial intelligence.
You may have noticed that software has “eaten ” the world and dematerialized a huge number of things over the last ten to twenty years. When was the last time you bought a physical CD, DVD, Blu-ray, etc.? Why would you do that when you can just watch the stream? Well, artificial intelligence will have an impact that is many times greater than the impact of software.
Look at your own stock portfolio and ask yourself questions. Is AI a key component of the company, or is it becoming a key component of their future? If not, then have fun losing all your money. This is not investment advice, I'm just sharing my thoughts. So we're very excited about this source of deflation because it will cause a boom.
So, this is a deflationary boom. We believe that the consequences of this “good” deflation will include creative destruction. Um, disintermediation or the destruction of the traditional world order. Remember when I said Katie Wood had an urgent warning for stock investors? That's what it was. Rewind, listen again until you understand.
We believe that approximately 50% of the S& P 500 index is at risk of creative destruction. Some more, some less, but on average 50%. The tragedy is that there are so many investors today who have been brainwashed into believing that the S&P 500 is a safe place for money, a reliable, stable, and predictable place to accumulate wealth and earn a decent income over time.
This may have been true before, but we need to reassess the situation. Today this is no longer the case. Katie Wood is right. So many companies in the S&P 500 will disappear over the next 10 years. There are so many vulnerable investors who simply don't see what's coming. Imagine holding most of your wealth in the S&P 500, thinking it would provide a steady and secure income for the next decade, and then discovering that half of the companies you owned in the index went bankrupt 10 years later.
Here's a recipe for unsatisfactory results. In fact, I know many investors in the financial education niche on YouTube who hold huge amounts of capital in the S&P 500. I won't name names, but I will say that these people will greatly regret their investment choices in a few years if they don't wake up and face the truth.
This will be ugly. Katie Wood is doing her best to urgently warn investors about this, and of course, “Oh, isn’t this Katie Wood crazy?” “Oh, just because she was right about Tesla doesn’t mean she’s a good investor.” Anyway, I'll stop there, but I'm doing my best to warn you guys. I hope you will spread this message too.
You probably know a lot of people who have a lot of money in the S&P 500 index. In my opinion, as in Katie's opinion, this is not going to end well. We both came to similar conclusions because we understand what lies ahead. A huge amount of upheaval and "creative destruction," as Katie called it. And what does that mean?
What we think will happen here. For companies that have spent the last 20 years catering to short-term investors who demanded immediate profits. Companies borrowed to buy back shares and pay dividends, but they didn't invest enough in innovation. In fact, many people did not take seriously the idea that innovation posed a threat.
I remember when we founded Arc in 2014, automakers and analysts thought it was a thing, maybe in the mid-20s. And we looked at the decline in the cost of battery systems and said: no, this is happening now. And now we see automakers scrambling, and we would say they are fighting for their lives. This is not an exaggeration on Katie Wood's part.
I've been saying this since day one on this channel. Most traditional automakers will cease operations by the end of this decade. They are truly fighting for survival, and most are failing. So we'll see a lot of that in financial services and energy. So, the two sectors that have performed best this year are, in our opinion, the most vulnerable.
In energy, again , growth of 40% since the beginning of the year. We believe that electric vehicles, and especially autonomous electric vehicles, which will appear in the coming years, will significantly reduce the demand for oil. It is at times like these that if you take a stand different from the crowd for good reasons, not just to be controversial, the rewards can be enormous.
And with respect to the recent behavior of value stocks, especially those that we believe are under threat, compared to the severe decline in innovation stocks, I really like this state of the market. And finally, we have a planning horizon, like most of those focused on long-term innovation. And in mid-February, those strategies, in general, according to our analysis, indicated that innovation would once again bring profits to investors, if our analysis—both general and detailed—of the opportunities associated with innovation is correct , and this would provide a 15% annual rate of return over the next 5 years.
Well , nothing has changed. Nothing has changed except that stock prices have fallen. We are at the “sell” level if our views on innovation are correct, considering the five innovation platforms. So, if the expected return at the very beginning was 15%, then now the expected return , again in general , should be within 25% per annum on average over the next 5 years.
I like this situation and we believe that the bull market has expanded and we look forward to innovation joining this movement again. That's it. A serious warning from Katie Wood for stock market investors: Be very careful where you keep your money. These so-called safe investments may not be so safe after all.
And I also agree that there are some really good deals on the market right now. Some of these technology stocks, the stocks of companies engaged in breakthrough innovation, that have rolled back 20, 30, 40, 50% from their recent peaks, it doesn't make any sense at all. Nothing fundamental about these companies, technologies, or the inevitable future has changed, but of course the market sentiment has.
If I didn't have a tax bill bigger than your girlfriend right now, I would invest every spare cent, but unfortunately I owe a fair amount to the IRS because the last time I had to pay taxes, I bought Tesla stock instead. And I did it once before too . Yes, that's right. During the 2019 recession, I bought a Tesla instead of paying taxes.
In the 2020 recession, I did the same thing. And I just can't put it off any longer . I hope you enjoyed this video. Let us know in the comments below if you are taking advantage of these huge discounts in the stock market at the moment. What stocks do you buy, what do you buy them with? Did you also sell anything?
Let us know in the comments below. I'm Stev want to get up to $250 in free crypto bonuses from BlockFi, hares from Webull and one from Stake — links are in the description. Thank you very much for watching. Share 've watched this far , you're cool. If you want early access, exclusive videos, regular Q&A , access to our private Discord server, and more, support continue to create content.
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