I Finally Get to Talk About Cathie Wood Again
First, I want to apologize for waiting so long. I was getting really good about only going two or three days before posting again, but I had my conference tournament for tennis this week and my Morehead-Cain. If you are reading this article and you are a Morehead-Cain admissions officer, PLEAASSEEEEEEEE. And with that, we can start.
I was going to write another column this week about Elon Musk. I did not want to write about him but felt compelled. Quickly, however, I found two things to be true. First, I want to write about Cathie Wood again, as it has been way too long. And second, the Elon/Tesla situation can be summarized quickly.
Tesla lost a lot of money, somehow more than Wall Street’s already pessimistic views. But because the market is so forward-looking, it does not matter. Tesla sucking is old news. Now, Wall Street’s favorite narcissistic man-child is promising cheaper electric cars and new models. Honestly, that is probably the right call. Cheaper models are needed, and the Tesla brand name will prevent erosion of the sport-luxury ethos. I am worried or would be worried if I were a Tesla bag holder, that it is already too late for Tesla. I fear that Tesla will never again be what it once was, and it does not matter how much money they cut off their price tags, or how many billions of dollars of subsidies are handed out again. And I am not trying to be sensationalist, I just do not see how Tesla reclaims their lost ground.
Okay, now we can talk about Cathie Wood’ ARK Fund(s). Cathie Wood has seen her fund lose 30% of its assets in four months. In 2021, her fund was worth $59 billion. Now, her fund is worth $11 billion. QQQ is up 6% so far this year. The ARK fund is supposed to be mega tech, where you go to get as much exposure to lean and hungry tech as possible, so you would expect the ARK fund to outpace the QQQ. No, instead the flagship, ARK Innovation Fund is down 16% so far this year. Down 16% YTD is an insane feat.
The ARK innovation fund has been dragged down by Tesla, Roku, and Unity Software in particular.
ARK has been outperformed by 50% since its inception by the S&P 500.
Just to remind you, the ARK funds do not work because they are hyper short-term bets that only work in low-interest rate environments where awful companies can borrow money hand over fist and continue to bet on future (and improbable) massive profits. The ARK Fund is unsustainable because it bets on bad companies and makes the calculation that enough of these companies are going to turn into good companies before the market tries to force them to make a profit. That calculation has turned out to be poor. These awful companies like Tesla, Roblox, Robinhood, etc., and somehow, this innovation fund was missed on Nvidia.
I try not to hate on missed stocks like Nvidia, because it can be so hard to time the market right, but my lord, they were so close. The ARK Fund had held Nvidia for about a decade and sold right before the stock went thermonuclear, which must have hurt. And most frustratingly, has yet to admit a missed call on their part.
Cathie Wood is an extremely smart person, and she is a good investor, but that has led to brash overconfidence on her part. Too much, she relies on intuition and vibes for where the market is going. That’s fine for me to do since I am managing pennies compared to her, but if you are managing the largest ETF in the world, as she was in 2021, you must be smarter than she was. Now, she must reset, admit some of her mistakes, and reposition for the future of tech.
