The Tell: Cathie Wood says Jack Dorsey’s ‘hyperinflation’ call is off the mark


Twitter and Square founder Jack Dorsey’s warning that “hyperinflation” is around the corner is getting some pushback, including a detailed rebuttal from tech investor Cathie Wood.

In a late Friday tweet, Dorsey, who is chief executive at both Twitter

and Square
warned that the devastating phenomenon, defined as rapid and unrestrained price increases running at a rate of 50% a month or higher, would “change everything.”

The tweet came as worries about rising inflation pressures have rattled debt markets, leading traders to pull forward expectations for interest-rate increases and stoking fears that central banks, including the Federal Reserve, will stomp on the brakes more aggressively than previously expected, risking an economic downturn.

See: The Federal Reserve’s next interest rate-hike cycle is coming but may not look like what officials have been projecting

High-profile investors, including hedge-fund titans Paul Tudor Jones and David Einhorn, have argued that Fed policy makers are inflation creators rather than inflation fighters. But Dorsey’s invoking of the “H”-word appeared to take the debate a step further.

Also read: Paul Tudor Jones calls inflation ‘biggest threat’ to markets and ‘society in general’

It also prompted Wood to post a detailed Twitter thread, rebutting Dorsey’s concerns, while noting that she had previously succumbed to fears of rampant inflation that didn’t materialize after the Federal Reserve began quantitative easing amid the 2007-09 recession.

A rising velocity of money — the rate at which money changes hands in the economy — was a missing piece then and now, she argued.

Wood, who is known for big bets on tech stocks and cryptocurrencies, then went on to detail what she sees as much bigger deflationary forces that she said are likely to outweigh near-term inflation that has been created by supply-chain bottlenecks.

These include technologically enabled innovation, which is the “most potent” deflationary force, she said, using artificial intelligence as an example:

Another source of deflationary pressure could come from “creative destruction,” she said:

And then there is the “cyclical” source of deflation that would come as supply bottlenecks unwind:

Soaring oil prices — the U.S. crude benchmark hit the latest in a string of seven-year highs on Monday — reflect squelched investment in fossil fuels, she said. Eventually, this will “sow the seeds” of faster adoption of electric vehicles, said Wood, who has long championed electric-vehicle maker Tesla Inc.
who saw its valuation hit $1 trillion for the first time on Monday.

Wood rode a tech rally to huge gains in 2020, with the flagship ARK Innovation ETF

returning more than 150%. 2021 has proven a rougher ride, with the ETF down more than 20% from its February high and off more than 2% for the year to date.

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