Cathie Wood’s bubble-chasing blowup destroyed an estimated $1.3 billion in shareholder wealth over the past decade, a Morningstar analysis published this week found.
Cathie Wood’s ARK Invest got caught out following the central banks’ transition from a decade-long emergency monetary policy to normalization, which pricked the bubble of everything.
“Cathie Wood’s bubble-chasing blowup destroyed an estimated $1.3 billion in shareholder wealth over the past decade”
WEALTH TRAINING COMPANY
Perhaps this serves as a warning that in the age of the internet democratization of information, the high-profile Wall Street money managers are no better or worse than regular Joe.
We warned in early May that the Fed’s transitory inflation narrative would fold, particularly in light of the war in Europe. Moreover, Fed hikes would burst the bubble of everything, making the markets uninvestable in 2022.
Cathie Wood bubble chasing blowup has come in fifth place among Morningstar’s list of top 10 wealth-destroying funds compiled by portfolio strategist Amy C. Arnott, and ranked just below investment vehicles from Credit Suisse, ALPS, Kraneshares, and Barclays
Doubling down on bets, more often than not, leads to magnified losses.
Planning to average into a position makes sense for those with the time to watch the markets and the discipline to do it.
“Doubling down on bets, more often than not, leads to magnified losses”
WEALTH TRAINING COMPANY
But deciding to double down on a bet off the cuff because you think you are right and the market is wrong is reckless. If you got it wrong the first time, what makes you think you will get it right again by throwing more money at the bet? At this stage in the game, it is not more loot that you need, it is more thinking.
Like many, we believed the moronic melt-up in stocks and risk assets would continue in early 2022. But we were dealt a wildcard, a lingering war in Europe. Realizing interest rates and yields would rise, irrespective of the media, Fed head transitory narrative BS story, and Wall Street charlatan analysts we figured when central banks tighten, the bubble pops and the king dollar rocks on the throne. So cash, USD was king in 2022.
“The ARK Fintech Innovation ETF, with $817 million in net assets, lost about 18% last year” – Wealth Training Company
Where was Cathie Wood bubble chasing blowup?
According to Morningstar, the bulk of these losses came primarily from two of ARK’s actively managed vehicles last year: the ARK Genomic Revolution ETF (ARKG) and ARK Fintech Innovation ETF (ARKF).
The ARK Genomic Revolution fund – with roughly $2.4 billion in assets under management – shed roughly 34% in 2021, per Yahoo Finance data, even during a blowout year for the stock market that saw the benchmark S&P 500 return 28.7% and the technology-heavy Nasdaq 100 churned out 27.5%.
The ARK Fintech Innovation ETF, with $817 million in net assets, lost about 18% last year
Year-to-date in 2022, the funds are down 49% and 62%, respectively — losses that are not reflected in Morningstar’s data.
In the case of Cathie Wood’s ARK, the investment management firm employs an actively-managed equity strategy with funds focused on disruptive innovation over five investment themes — artificial intelligence, autonomous vehicles, fintech, DNA sequencing, robotics, and 3D printing.
“Any time you have a growth-oriented investment style, those stocks are going to be very sensitive to any increase in interest rates because so much of the value of those stocks is based on cash flows into the future,” Arnott said in an interview with Yahoo Finance.
ARKK’s pandemic return hit 150% in 2020, which attracted $20.6 billion in estimated inflows in 2021.
Wood earlier this year promised ARKK ETF investors a 50% compound annual rate of return for the next five years.
SARK would have been a better play.
