The rise and fall of Cathie Wood, controversial Wall Street investor
nymag.com
nymag.com
It's important to note what this really means. You can have 4 years of 20% returns and if the last year you're down 50%, you gave back nearly everything you've ever made, assuming you had no new money come in those years, otherwise even more. The max drawdown is whats important. You can almost always make money writing out of the money call options, except the one year where you give back everything you've made and then some. As expected:
> Her ARK Innovation fund, often known by its ticker as ARKK, returned some 157 percent during that first year of the pandemic, compared to just 18 percent for the S&P 500 as a whole... Wood’s fund is now exactly where it was in March 2020, meaning pandemic investors who bet on her have now round-tripped all the way up and all the way back down. Adjusting for inflation, they have lost money.
Cathie Wood is one of those investors that just makes directional bets, in her case high growth tech stocks. They happened to do well last 5 years or so, so it appears that Cathie has done well. But same as someone who just plowed a bunch of money into Bitcoin in 2012, it doesn't mean you're a good investor or you have anything interesting to share today.
I read her Twitter occasionally and found her very unimpressive. For instance, she made some uninformed comments about "velocity of money" decreasing and that's the reason we won't have inflation (this was during the "transitory" phase of inflation denial). Then she had some ridiculous examples of things actually going down in price like AI training costs, which should balance things out. It was so comical it could have been on the show Silicon Valley.
https://mleverything.substack.com/p/cathie-wood-inflation-an...
This is the same issue with these ridiculously high "guaranteed" returns on DeFi lending.
Any significantly above market returns of any kind are either a scam or have risks that are either not understood or not disclosed.
I'm honestly surprised the hedge fund industry has survived so long and grown so large. In some cases you get to invest in a market you otherwise couldn't access but it seems like long-term returns underperform passive investments in most cases.
ARK is similarly invested in very illiquid positions. Hwang was one of Cathy’s initial investors, and there’s reason to believe they share some similar views. Both are devoured charismatic Christians. An write up on Cathy Wood highlighting her approach to investing: https://www.ft.com/content/a93f4de2-35d2-44e1-a6a1-0000cba0d...
And here’s an article from last year speculating on how ARK’s illiquid positions could lead to a vicious cycle: https://seekingalpha.com/article/4411559-raiders-of-lost-ark...
And a write up from controversial but always entertaining zero hedge: https://www.zerohedge.com/markets/cathie-wood-and-definition...
By definition, the market return is an average, and there must be returns above and below the average. You could say above market returns require taking above market risk, but often times the level of risk you are taking is not known for certain at the point in time you make the investment.
Also, the hedge fund industry's goal is not necessarily to beat the market, it is to provide the highest level of return per unit of risk.
This is every investment, not judge hedge funds. Every asset has a risk profile. Generally speaking, the higher the risk, the higher the return.
US government T-bonds have a low return because they're viewed as essentially risk-free. Put another way: the US government has never defaulted on a debt and that debt is backed by the US government. It's not that a default can't happen but if it does, we probably have larger problems. So low-risk, relatively low return.
Individual stocks on the other hand have much higher risk. So the return can be much greater but you can also lose all your money.
Funds reduce risk by splitting investments across a pool of assets. This reduces risk but also reduces likely returns (both positive and negative).
When people compare actively managed funds (including hedge funds) to passive funds (eg S&P 500 weighted fund), actively managed funds overall underperform passive funds for the same asset classes and risk profile.
That means you compare an equity hedge fund to other equity funds. This also means whenever we talk about average returns we actually mean average returns for that risk profile and asset class.
Agree, but those returns well above average, could be tomorrow's well below average. (And the ones well below average today were yesterday's well above average.)
So it can still be the case that the ones significantly above market and significantly below market are one and the same.
Look at past performance of Mutual Funds. If they peaked and you buy it, you can almost be 100% sure, that it will fall.
I remember Janus' ads running a victory lap about one fund with a >100% return in 2000, only to have ads talking about how to stay strong and deal with "uncertainty" or something after the crash.
So basically you are saying a hedge fund is just optimizing for sharpe.
That is not true. Sharpe is just one way to compare performance at the same level of vol. It's a useful metric but very limited. It tell you nothing about exposure, risk and distribution.
I discussed how hedge funds position themselves here:
Before computers were widespread there used to be niches where outsized returns did exist, but just too small for large professional investors to bother. Like a once a month mis-pricing that you could make a few thousand on, max, due to low liquidity.
Hilariously enough, that’s exactly how the most famous “value” investor Buffet started out: convertible bonds arbitrage. So much for “buy and hold undervalued but very good companies forever ” lol.
He eventually grew out of that niche and became too big, so he had to develop a new image to sell to his LPs/investors and move on to bigger things.
I have a hunch that the hedge funds proliferation in some part is due to the availability of speed and compute. Today you can leverage machines to exploit a million small niches, and lots of funds are doing just that. Tons of mini buffets around, they just can’t grow as big anymore, or at least with much lower frequency.
Your premise is based on funds making a lot of money, which they want to shield from taxes. How do you think they make money? (Caveat: most HFs underperform, but that’s a different issue entirely)
Lose money in the markets to save on taxes? Makes zero sense.
I'm more interested in this phenomena with hedge funds treating short term cap gains as long term.
I think what GP means is, your fund has some trading profits, which if an individual did the same trades would be taxed as earned income or short term gains, but the fund actually doesn't have profits or pay taxes at all - it's a pass through entity. You, as an individual investor in the fund, pay taxes (long term or short term cap gains as appropriate) when you exit your investment in the fund.
This is a pretty reasonable way for capital gains taxes to work. The secret sauce successful hedge funds have is not access to this tax optimization, but some way to actually generate those trading profits in the first place.
This way you get to post a net loss.
Tax are due on capital gains which is basically <sale price> minus <purchase price>.
You can't claim a capital loss unless you paid the overvalued price. And then you just lost money anyways.
https://www.investopedia.com/terms/t/taxgainlossharvesting.a...
It is literally a thing. I cannot for the life of me make sense of how to make it work that doesn't strike me as off, but enough people get utility out of the moniker that it's got a page. So...
Tax loss harvesting is real, you just time when you take a loss to offset a gain. Then immediately reinvest. You haven’t lost any money in total, you can just claim the loss on your taxes (but will pay higher capital gains in the future).
You don’t pay taxes on inheritance.
Very subtle difference,though. I am simplifying things here but IIRC, Bear Stearns blew up because they wrote insurance for things they didn't think would ever happen (housing mkt going down) and had a lot of exposure vis-a-vis how much premium they collected (i.e. sold a put -- limited upside , unlimited downside). I doubt ARKK has _written_ put options. It might be the case that the value of the ETF will go down drastically but they won't go bust because of liabilities.
I was reminded of this because Bear Stearns was actually the only major player that refused to bail out LTCM [1], which pissed off a number of other firms. I don't know if the institutional memory was long enough for this to impact Bear 10 years later, but it is ironic they were looking for a bailout after being so adamant about not participating in one.
To your point, the main LTCM crew raised money to start a new fund only a couple years after their disastrous failure. People were willing to gamble millions on these guys still!
[1] according to the book "When Genius Failed"
ARK is like a gambler who won his first lucky bet on a horse in life (TESLA), got hooked on gambling (growth stocks), made some incredibly stupid bets and is now in complete denial when markets turned against him..
LTCM did some novel and sophisticated stategies (for a time), realized the markets got too shallow for its strategies, returned most money to investors and lost liquidity due to black swan event. It is too easy in hindsight to tell they should have known better.
If you want better comparison for Cathy it is Bill Ackman's Persing Square Capital Management buying Netflix in euforia without any analysis and dumping the stock in panic 4 months later, loosing 400 mllion dollars..
Also FWIW the next fund that the core group started didn't last much past 2008. I think it's fair to say they were wrong about the amount of risk they were taking.
But yeah the initial bets were smart and not "gambling". The problem is the insanely big and leveraged positions they took and continued to build even while their core business was clearly shrinking. Especially the way they dove into markets they were less knowledgeable about, at least the way the book presents it they did not do their homework on e.g. merger arbitrage in the way they had with the bond market.
IMO they totally got cocky too, even if they got cocky for a better reason.
In many markets, real estate is looking similar.
I don't remember that. I watched a few of his videos. Seems like rational statements explaining why Warren might be wrong about Bitcoin. https://www.youtube.com/watch?v=RAvYvyj37UU
> Blew up a lot of retailer investors funds through his SPACs although he himself Madeoff quite well given the closing conditions.
I was not aware of that. That's a pretty strong accusation you're making there, it sounds like he committed crimes. Do you have a link to substantiate this?
A lot of his SPACs are trading under their initial price of $10/share.
Here's 3 examples: CLOV, SPCE, SOFI. If you bought in during the SPAC stage or at IPO, you'd have lost quite a bit on any of these.
> Blew up a lot of retailer investors funds through his SPACs although he himself Madeoff quite well given the closing conditions.
does not seem to be comparable or descriptively equivalent to this part:
> CLOV, SPCE, SOFI. If you bought in during the SPAC stage or at IPO, you'd have lost quite a bit on any of these.
Was your reference to "Madeoff" intended to convey a ponzi scheme? Because that doesn't seem to be what those investments are.
Instead googling indicates these are real companies that appear to be operating, albeit in challenging businesses.
Here's what I found:
CLOV Stock: Is It A Good Long-Term Opportunity? Clover Health is a former SPAC that became a penny stock. At the $2-3 level, could CLOV be presenting a decent long-term opportunity?
Bernard Zambonin and Guest Contributor
May 23, 2022
Premarket Mover: Virgin Galactic Holdings Inc (SPCE) Up 1.65%
https://www.livemint.com/news/world/chamath-palihapitiya-kin...
I see what you did there mister :)
I see what you did there.
Is that really so different from the VC approach?
VC really makes its money work for it.
ARKK is just picking stocks.
A VC putting in $1M for a Series B and getting $100M out is within the realm of possible.
Buying $10M of public stock and having it turn into $1B isn't quite so realistic, at least not on a continued basis that an investing thesis would require.
Far be it from me to defend ARK but this statement I've seen repeated by CFAs -- velocity of money is linked to inflation -- it's the only reason we didn't see inflation in the "real" economy earlier, no?
Since financial assets were still moving freely (and sovereign bond yields were crushed), they felt the immediate effects of inflation. It's obviously idiotic to say that velocity of money will be decreasing going forward or something (did she say this? surely not?), but it seems like the recent increase in inflation is due to the real economy opening back up (and velocity returning to normal) along with lingering supply side shocks.
Would love some correction if I've got this the wrong way 'round.
It is tough being mid 40s and realizing my entire adult life was a golden age that is gone forever.
I do agree You're right that we are probably seeing the effects of globalization policy though, but I can't say I've thought much about that long of a time frame.
Mass onshoring will likely drive higher prices.
Cathie Wood thinks that more technological improvements are coming to counter-act this, and might even cause deflation. Most commentators are unconvinced.
It took a while for banks to extend themselves based on capital like they did prior to 2008. Once they did, the full extend of the "new money" drove inflation.
It can be, as increased demand can increase the velocity of money, but it's not directly or intrinsically connected (as you can also just suddenly trade something back and forth many times without prices changing and the velocity would have increased).
Really, it's demand/supply which determine prices.
(real GDP)×(price level) = (money supply)×(money velocity)
In general terms its probably a decent model. But ya, there are situations where it's not completely internally consistent.
If you were unlucky enough to hop on the bandwagon near the end of 2020 and you're still holding on now, that is really unfortunate.
You can also have 4 years of 20% returns with 10bn of capital, and then 1 year of down 50% with 50bn and have actually lost $$$'s despite a nice looking % return.
It also happened to some household names that you would consider "legendry investors" who made massive returns in 08.
Once you know that you see it again and again
Yes but luckily the fund went up much more than that, much faster. Feels like a strange point to make?
Peter Thiel gave a speech at a Bitcoin conference a few months back where he explained Bitcoin price movement resembling a levered tech stock. And I'll say, it makes a lot of sense and dispels the whole idea of Bitcoin being an inflation hedge.
Her response: “my team is more diverse than most, and diversity adds effectiveness.”
She also supported Trump.
Like she’s going for crazy in all directions.
1. Tiger Global that lost most of their VC bets [1]
2. Softbank's Vision Fund [2]
While it's entertaining to judge from the timeline and smirk at these losses, the role they play in building a future that is "better" is still important. All of them benefited a lot from a decade of liquidity and now they need to show resilience to survive once the music stops.
[1] https://techcrunch.com/2022/05/10/tiger-global-hit-by-17b-he... [2]https://www.cnbc.com/2022/05/12/softbank-vision-fund-posts-r...
https://www.bloomberg.com/news/features/2021-04-08/how-bill-...
https://www.efinancialcareers.co.uk/news/2021/06/jason-varni...
Isn't Softback the typical bagholder in hyped up companies with no real prospects? (cough wework cough...)
All you can say is maybe they're not as smart as they looked when the market was rocketing.
I think to some degree she believes her own bullshit but I think she also knows that it doesn't matter at all if the fund does well in the end. She already generated so much volume, the performance doesn't even matter anymore.
Cathie Wood is playing classical martingale strategy with investor money. Her business is ARK Investment Management, LLC. and fees. It's winning strategy for her, not long time ARKK investors.
I don’t think Cathie Woods has ever read a single book on investing. If she has she ignored everything she read.
Just fyi, your prior comment somewhat contradicts this one. If Wall Street professionals themselves don't know anything about investing and are just fooling themselves, then how can any book know more than they do, given that investing books are written either by Wall St professionals, or by not-Wall St professionals. For someone like Cathie who is actively studying the markets all day and has her, or her clients', own skin the game, investing books would be no better and likely worse sources of information for her.
i cringed reading that
It is very telling when people start writing "career obituaries" like this just because a stock is 50-70% down. What is it that Warren once said: If you can't stand your stock pick being 50% down then you shouldn't be doing stocks?
The macroeconomics is clear. Depopulation and digitisation are the major trends that will define the coming decades. If you're -50+% down on your tech/growth picks right now. It may be 1000%+ (gains) by the time you actually want to draw-down your investment during, say, retirement.
Is Wood engaging in a martingale strategy? If so, can someone point me to resources that show it?
Should Wood be getting positive returns every year, even when the market is in a down turn? My understanding is that the common sentiment is that one can essentially do no better than the market average, which is what an index fund is essentially trying to do. Are these funds profitable even during a market downturn? Why are index funds expected to lose money but Wood's fund not?
I appreciate that a one year 50% loss can wipe out four years of 20% returns but a market down turn affects everyone, not just Wood's fund. Is the market downturn affecting Wood's fund more than a vanilla index fund even after taking into account the explosive growth before the crash?
For some clarity, Wood's fund has more than doubled it's stock value from 2017 [0], which puts it at an average 14% yearly return.
My understanding of index funds is that the expected return is somewhere between 8%-10% APR. My take on Wood's fund is that it's trying to be more judicious about which to use for it's index fund so has the potential for more upside because of undervalued tech stocks. Even under this conservative APR (as of this writing), Wood's fund still beats out a vanilla index fund.
If I were an investor in Wood's fund with a time horizon of 5 years, I would be happy with the performance, regardless of a the last years crash.
I'm pretty skeptical of high returns from Wood's fund but, at the same time, the strategy seems pretty straight forward: invest in emerging technology that has the potential for high return and, essentially, make an index fund out of it. Isn't this what YC does, except by taking ownership stake in companies rather than investing in the stock market?
[0] https://finance.yahoo.com/quote/ARKK?p=ARKK&.tsrc=fin-srch
index funds are getting market returns, which could be negative. However, over a long period of time, the market returns of a highly diversified portfolio is expected to be positive, and this is based on historical evidence, and the theory that the market's growth is tied to the growth of humanity.
A sector specific fund has no such evidence for it's growth long term. It may be obvious in hindsight that tech must grow, as it's the future, but imagine if you did invest in a train based sector fund back in the industrial age - what would've happened to your investments compared to the market average?
... so they're losing money? Isn't this precisely the point I was making? Index funds are losing money in a bear market as is Wood's fund.
Wood's insight is to focus on technology, as these tend to have high returns because of the value they provide and are (potentially) undervalued by the market. Again, isn't YC doing exactly this strategy except for company ownership?
While I appreciate your pushback, I think it's a bit dismissive to compare Wood's strategy with investing in railroads. Wood is investing in a diversified portfolio, the focus of which is technology. At least, it's a strategy that's diversified in specific technology sectors and diversifying the investment in each sector by betting on a few players in that space.
I don't have a lot of historical knowledge but to me, this would be like someone investing in an "industrial revolution" tech sector in the early 1900s. That is, invest in steel, railroads, automobiles, etc.
People confuse it with the actual diamonds and hilarity ensues.
Stuff like the latter actually happens. Efficient markets my, err, skepticism.
(2) on a risk-adjusted basis
The efficient-market hypothesis (EMH) says that it is impossible to "beat the market" *consistently on a risk-adjusted basis*.
According to the efficient-market hypothesis it's possible to beat market. HODL or ARKK are not evidence against EMH. BRK is probably the closest evidence that EMH is not as strong as assumed.
And before something like Berkshire even becomes interesting to any version of the EMH, you have to show that Medallion is a fraud. Which, who knows it’s pretty fucking opaque, but they haven’t taken outside money in a long time and keep putting up 30-40% annualized almost every year.
Then you must agree that your comment linking ARKK and HOLDL to efficient markets was misplaced.
"The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information."
You'll note that "consistent", "risk-adjusted", and "beat the market" are all in quotes, because they are not well-defined technical terms, at least thusly contextualized. What Wikipedia's over-simplification in the first paragraph says is that all available information is incorporated into asset prices.
Now even that's more than a little nuanced than one might conclude, because not only is there considerable controversy about how quickly and by what mechanisms this incorporation into prices takes place even in you buy into this malarky, but Eugene Fama himself would sound like Greenspan in front of Congress trying to explain how a defunct Chinese wireless company goes up 47,000% in year on the back of a different company having it's IPO [1].
But I'm really going to hang this on your use of the word "misplaced", and no, I don't think a playful comment with actual information in it ([1] again) is misplaced in a thread full of playful comments about Silicon Valley the TV show. I think grab-the-first-paragraph-from-wikipedia-and-be-a-killjoy-pedant is misplaced.
[1] https://www.cnbc.com/2019/04/18/investors-appear-to-trade-wr...
Lots of people get in and out of some crazy asset bubble at the right time and then go on to lose money at everything else while spewing advice the whole time: just ask Peter Thiel or Mark Cuban.
That said, she’s not done yet. I think we have one more bubble phase brewing.
"traders" trying to play short term trends may indeed be wrong about the near term direction of the markets.
i’m talking my coworkers at FANG companies or very smart investors in other areas.
i think it’s because although people can be talented in one area it doesn’t mean they are well rounded and sophisticated in other areas
Personally, I interviewed with ARK and quickly walked away once I spoke with the actual analysts on her team. They spewed the same hype-babble she does and lacked an informed view of the industries they covered. Its fine to market the hype if that's what you're selling, but you can't sell yourself on it too.
After that period there was a flood of headlines using Cathie Wood's name to pump some not-doing-so-well stocks even though the name started being correlated with less than great investment opportunities.
Buying almost every tech dip doesn't make a great investor. But when an index like SP500 suffers due to unfavorable major tech stocks price movements, one cannot expect that thematic ETF like ARKK will do great when the sector isn't doing well.
> Seeing people around you pouring money into a hot fund that only seems to get hotter can make sticking with any previously well-thought-out investing strategy difficult. As if your diversified portfolio only returned 10% last year when you could have earned 200% in the best fund. While each hot fund manager will seem brilliant at their peak, the phenomenon of star fund managers, including their powerful narratives, huge returns, and media adoration, is nothing new, and it’s not a story that tends to end well for investors.
* https://www.youtube.com/watch?v=p6HrepdLSu4
Basically: Cathy Wood and Ark were/are nothing new. Over the decades there have been many such fund managers. The video was a summary of a longer (1h) podcast episode he did on the topic:
> When you see funds performing monumentally well, you may feel regretful for not investing in them earlier. There is, however, a long history of funds that skyrocketed only to have major falls from grace a brief period after. The bulk of today’s episode is spent exploring this idea in the portfolio topic section but before getting into that, we kick the show off with some updates. We begin by talking about the GameStop short and whether this casts any new light on the concept of market efficiency. From there, we take a look at some recent news, particularly one story about the meteoric growth of New York-based investment managers ARK Invest, who recently hit $50B in assets under management up from $3B this time last year. This story acts as a great segue into the portfolio topic where Ben traces a history of funds that performed colossally well for a brief period but then plummeted thereafter. These funds were under the direction of ‘star’ fund managers with a focus on investing in tech disruptors. The discussion acts as a cautionary tale about overpaying for growth leading to poor realized returns. For the planning topic, we continue to shine a light on the ‘Talking Cents’ card game, a financial literacy outreach strategy created by The University of Chicago Financial Education Initiative. We invite the director of the Financial Education Initiative, Rebecca Maxcy, onto the show to speak about some of the thinking around this project and then discuss a few of the questions posed by the cards ourselves. Tune in today!
* https://rationalreminder.ca/podcast/136
* https://www.youtube.com/watch?v=LhluPwDaNAQ
Bunch of links to the research papers he mentions/cites.
Basically: top managers do have some skill, but as the fund gets bigger it takes more skill to out-perform the market. The problems with many managers really start arising with 'open' funds where anyone can throw in money: generally these people 'run out of runway'. Whatever skill they may have eventually gets overwhelmed.
It's probably why Renaissance Technologies' (RenTec's) Medallion Fund can get such great returns: closed to everyone except a select few, and even then the fund limits its size to 'only' US$ 10B, and 'excess' money has to be removed. They realized whatever they're doing can't scale.
Being a successful investor during a bubble is not exactly difficult. Getting out at the right time is the hard part.
—Burton Gordon Malkiel, “A Random Walk Down Wall Street”
Invest accordingly.
Of course, this turned out to be pretty much impossible in practice, and now the name seems to be applied willy-nilly to anybody who invests large amounts of money in ways that are for some reason or other not available to the average punter. And even that distinction seems to be gone now that funds like ARK are available in handy ETF format to anybody with a Robinhood account.
ARK is far from failing. According to the article they still have $16 billion under management.
Which is a lot. For context, Ackmans' PSH is $12 bilion.
It's a hit piece because it's all character assassination and zero arguments for why she might be wrong.
Even if you don't like her investing it should bother you that the article is all innuendo.
"She's crazy christian". "She took money from Bill Huang". "It's all fed-driven mania". "She's trading like an amateur hodler". "That guy says she doesn't know what she's doing". "clickbait-like flood of dopamine-inducing buzzwords".
Bill Ackman, Jim Chanos, Micheal Burry - those are just few investing douchebags that had one or two hits and then proceeded to be wrong and loose money many times over.
I've never seen such hit piece written about any of them. They're still considered successful investors.
I think she's getting a bit of reflected Musk hate because unlike pretty much all wall street "professional" she was right about Tesla.
When Chanos, Ackman, Burry (and many, many others) were calling Tesla overvalued company nearing bankruptcy and loosing money shorting it, she made the right bet for the right reasons and won big.
ARK is heavily invested in tech stocks. Tech stocks took a beating for reasons you didn't predict so if you're making fun of her investments, you better be doing it from private island you bought after shorting tech stocks six month ago. Cathie Wood is stupid because it was all so obvious that inflation, war and fed rising rates will happen, right?
You just nailed it. There was no talent, it was just pure survival bias. Out of all the portfolio combinations, someone out there was going to go with purely speculative unprofitable tech. Someone always does. ARK began in 2014 and they were too early. For several years they were mostly flat, offering meager returns.
And then again, through sheer statistical probability, that person did it at a time when the Fed went nuts, the President at the time was highly focused on the market, when the new Dot Com bubble was inflating and VCs were desperate to give anyone with an idea and the right buzz words money, and across the ocean, some guy was committing hilarious financial crimes that make Wall Street Bets seem like responsible investing. In fact Bill Huang blowing up marked the peak of speculative tech's valuation.
And it's happening again - but this time in energy and commodities, except those fund managers have all been humbled by the absolute knackering that has been the last decade. They don't go out there and talk about how WTI crude is going to trade at $500 and their projections for 50% GDP (before inflation of course). They generally just talk their book in the appropriate channels, and err on the side of cautious optimism instead of outrageous projections. Their models are also infinitely better than anything ARK has ever put out.
In summary: "there are no gurus, only market cycles".
For context, I’ve been a professional public markets investor for a number of years. Also, this isn’t a comment on either Ackman or Wood.
ARKK was levered bet on growth stocks, and buys them at high multiples. There's no risk management. Good funds manage risk well so that it's harder for them to be cleaned up by a black swan.
Granted many fund managers don't very do well either, but at least Burry had a much better track record: https://stockcircle.com/portfolio/cathie-wood/performance https://stockcircle.com/portfolio/michael-burry/performance
I'm an extremely boring passive investor who doesn't know anything about macroeconomics but I was definitely hearing people across the political spectrum warning about inflation 2 years ago. And as long as I've been on this site people have thought the Fed's interest rate was causing market distortions.
If the answer is no, then it’s largely pure stupid luck.
https://www.cnn.com/2021/05/26/economy/inflation-larry-summe...
Tons of economists predicted this. Larry Summers is a very prominent example. You just have to open your eyes.
It's not 50/50. What happened is orthodox economics ie. academic consensus. And Krugman is a shill, FYI.
You could possibly argue that ARK investors have fallen, but even that is a question semantics and of what the future holds for innovation. She has a broad set of funds in the growth space. Perhaps a bit US-centric, but that's easily known before buying. Are we really seeing a future where those companies won't be bid back up?
Too bad her fund is composed of many companies that are not tesla and have done horribly. Just being right about one stock means nothing if the rest of them do poorly.
>I've never seen such hit piece written about any of them. They're still considered successful investors.
Success at raising money does not mean successful as in making their clients money or making good investments.
See the link between the 3? She was basically the only woman of the lot. Do you see a lot of famous hedge funds women? Yeah. None.
https://news.ycombinator.com/item?id=29698436
Mind you, Cathie Wood and Bill Huang and Masayoshi Son and Tiger are all levered beta plays with Ponzi dynamics. The core premise is not valuation but rather can they find another buyer willing to pay a premium for the story they shill. Think We Work but in the equity markets. The high beta stocks in these funds aren't only held by ARK, they're held by many, many hedge funds and are known in the business as "hedge fund hotels".
As such, many on Wall Street are incentivized to juice these stocks, promote them, and find bag holders as exit liquidity at the highest prices possible. This does not make them good investments and it absolutely makes these fund managers shitty fiduciaries.
What's worse, she makes statements to lure in retail investors:
""" For those who aren’t following along closely, Wood once again publicly predicted that ARK Invest’s flagship exchange-traded fund — ARK Innovation ETF (ARKK) — would generate annualized returns over the next five years of 50%. Said another way, she predicted that ARKK would generate over 650% in total returns in five years. We all know this is highly unlikely. In fact, I believe that since the enactment of the Investment Company Act of 1940, it has only been achieved by a registered investment company a single time. In that instance it was achieved by a 3X leveraged fund.
These outlandish predictions help ARKK and Wood at the expense of retail investors. Unsophisticated retail investors look to ARKK’s incredible past performance and Ms. Wood’s stature in the industry and are likely to rely on these predictions in making investment decisions. If these investors place a high level of confidence in Wood, they may lose a large portion of their capital. Retail investors are the real victim of these predictions. """[0]
Think about everything Chamath promoted. Every single one of those companies had multiple rounds of VC funding which were ultimately unloaded on the public at insane valuations through SPACs. Sure he and his LPs made out like bandits, but was he right about anything other than the fact he could lure retail to pay stupid prices and hold his bags? Think about alt coins. Same bullshit.
IT'S ALL FRAUD. JUST LIKE CRYPTO. IT NEEDS TO STOP. THE CAPITAL MARKETS ARE A CIRCUS FOR VCs.
I don't think it some coincidence Tesla mooned alongside crypto. It's all the same crew...
[0]: https://citywireamericas.com/news/opinion-the-sec-needs-to-c...
Just a few months ago prominent investors were on the record saying Warren Buffett style value investing is outdated and dead. They were and are wrong. Value Investing might not realize huge one year gains, but it also won’t see all of those gains erased at the hint of an economic downturn.
Like, sure, if she'd been able to, she could have saved her investors a lot of money if she sold everything last year and held cash, with each of her ETFs remaining frozen near the top. But that would defeat the purpose of having ETFs open to public investors. And maybe so would buying instruments that hedge against declines in her picks.
Yeah investors who piled into her fund near the top got burned but it's not like they got bait-and-switched.
As an investment strategy, it's a long-term play. Whether the holdings make sense is a whole other question. But don't expect a huge change in strategy just because the markets are down.
Any sane person knows that Teladoc has no experience in genetic therapeutics (unlike BEAM for example, which has a chance of fixing genetic mutations without a double stranded break...I call that disruptive innovation).
Oh there was nothing she could have done different. From the moment she decided her fund would be an ETF she was essentially locked out of the one action that could have avoided this.
I'm sure it's not much consolation, but "actual" hedge funds are for the sophisticated investor. These funds have access to more sophisticated ways of wiping out investor money.
That should say enough about her qualities ( on some Christian podcast)
Here's the podcast: https://www.jesuscalling.com/podcast/surviving-and-thriving-...