Cathie Wood’s flagship fund – ARK Innovation ETF, is down 30% year to date. When Wood was invited on CNBC earlier this week, she took it as an opportunity to defend the fund by saying some of her investments are onto innovations seen once in a century. Unfortunately for her, ARK investors are not willing to wait a century for the returns. Her 2022 performance follows on another dismal performance in 2021 – ARK ETF was down 21% in 2021, while the S&P 500 was up about 28%. She had made a similar call in Dec 2020 predicting a five-year compounded annual growth rate of 20% and then followed it a few weeks later saying that the fund could deliver a five-year compounded annual growth rate of up to 40%. Given the performance in 2021 and 2022 ytd, she has a lot of ground to make up to get to anywhere near a 40% five year CAGR.
Another fund which has struggled with credibility is Hussman Strategic Growth Fund, which has lost 4.7% annually over the past decade while the S&P 500 has posted 14.6% return during the same period. For the underperformance, John Hussman – the portfolio manager, has bad mouthed the Fed for zero interest rates, questioned the investors for speculating and so on, until there was nowhere to hide.
On the other hand, the Fed, by all accounts, waited too long to raise interest rates, has a very different narrative. Unlike its bitter Wall Street cousins – Jerome Powell, the Chairman of the Fed, has on every call over the past months repeatedly stated “It is time for some humility” and “We have to be humble”.
Future Wealth’s View
In objective professions like sports and money management, the numbers don’t lie. One has to be willing to eat crow. In more subjective professions such as working in a corporate job, one can make up all kinds of excuses for getting fired or not getting a promotion or raise and there is no way to confirm or verify it.
In defense of the Fed, their moves during the pandemic in 2020 avoided what could have been a complete meltdown of the global economy. But, the pundits on TV don’t seem too willing to credit the Fed for its timely support. The reasons are very primeval – it is always easy to criticize and harder to give credit.
As a financial advisor making investment decisions for my clients, I once made a comment on CNBC that “There is no compelling reason to invest in any of the FAANG (Facebook, Apple, Amazon, Netflix and Google) stocks at the present time”. The interviewer then asked me “What if you are wrong?”. I quoted Dan Quayle’s famous quote – “ I have made mistakes in the past, I have made mistakes in the future”. The link to the CNBC interview is here (CNBC, unfortunately, edited out my Dan Quayle quote) https://www.cnbc.com/
In the end, it all comes down to being humble about our abilities. As the saying goes – “Confession is good for the soul”.