You really have to do both. The calories you burn while exercising are trivial. If you assume what you burn is 100% fat (unlikely, most folks don't start burning mostly fat until after 45 mins of exercise), 200 kcal (the big-C food calorie) only about 20 grams. You'll lose most of your weight just existing.This is what I wanted to know. So, bulking up and then doing cardio is the way to go?
The benefits of the exercise is that your basal metabolism stays higher (you burn more doing nothing), you're less likely to have excess carbs sitting around to be stored as fat and if you're exercising for longer durations (45 mins +), your body will start burning fat sooner.
Since the vast majority of fat burning takes place when not exercising, the more muscle mass you have, the more you'll burn. Plus, it takes energy to build/repair muscle, so you'll burn more doing nothing again.
Another "freebie" is to drink a lot of ice water. Your body will have to expend energy to warm it to body temperature. Plus you get exercise fidgetting trying to finish what you're in the middle of before you head off to the bathroom.
Ray