Another Friday, another rant on everybody’s favorite investor, Ark Invest CEO Cathie Wood And, more specifically, Cathie Wood’s market outlook.
But this time, there’s a couple of guest stars along for the ride as well, starting with Michael Burry of “The Big Short” fame.
This whole story began on Monday, when 13F filings revealed that Burry’s Scion Asset Management bought 2,355 puts against Wood’s ARK Innovation ETF (NYSEArca: ARKK). It’s worth noting that Short also has a substantial short position against Tesla Inc. (Nasdaq: TSLA) — Wood’s largest holding.
This has led to a number of articles and interviews regarding Cathie Wood’s market outlook. Namely, her saying that we aren’t in a bubble.
Are you kidding me?
Cathie Wood’s Market Outlook
Of course we’re in a bubble.
We’ve been in a low interest rate environment for a while now. And guess what… low-rate environments create asset bubbles.
And the Reddit crowd fawning over Cathie Wood and her market outlook just exemplifies that. The fact that ARKK has done so well means we’re in a bubble.
Because as I’ve said all along, the best way to beat inflation and a bubble is to be long on what is in the bubble!
So I’m not saying her investments are wrong, it’s a good approach — when in a bubble.
But I also think that Burry’s approach is sound as well, because all bubbles come to an end. And the time until Wood’s investments actually grow and change the world is a long way away. Burry is probably more correct in the short term.
But the issue with Burry’s approach is a question of when. And it’s not right now. This bubble that Cathie Wood’s market outlook doesn’t acknowledge has a long way to go before it deflates.
So just like in “The Big Short,” Burry is right… he’s just too early.
The analogy I think of for this situation is driving. When in a car, drivers need to be aware of the car a few hundred feet in front of them, not just the destination…
Another Thing She’s Wrong About
It’s pretty well-known that Wood is an “innovation investor.” Which explains — but… not really — the top holding in her fund.
Enter our other special guest: Tesla CEO Elon Musk.
She apparently believes that Musk is some innovative savior. And, sure, he has some lofty goals. But mostly he’s just good at getting people excited. We all remember what he did to Dogecoin, right?
On Thursday, Musk announced that by next year, Tesla will produce a prototype of the “Tesla Bot” — a humanoid robot. Obviously, the word “robot” got all kinds of media folk and everyday folk excited… but should they be?
My favorite quote from the announcement is when Musk said, “We’re also good at sensors and batteries…”
I ask again…
Are you freaking kidding me?
Did we not just cover the number of accidents caused by Tesla’s autopilot system and its sensors? And how even with cutting those corners, the company barely beats margins?
So while Cathie Wood’s market outlook may be off base, her strategy isn’t wrong… except in this one area. Musk and his robot aren’t innovative. It’s just a distraction from the two investigations Tesla has fallen under.
There is one company in the EV space that is highly innovative, however. And it just made a big move. It’s a member of our Fortune Research Pro portfolio, so check it out while you have the chance.
All the best,
Matt Warder
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