CEO of Ark Invest and infamous creator of the ARK Innovation ETF (ARKK) Cathie Wood defiantly said that “innovation solves problems, and the world is facing many more problems today than two years ago. Innovation is key to real growth!”
She likes to keep on banging on about innovation being the panacea to the tech industry when the big tech titans are doing absolutely zilch regarding innovation.
Offering new personalized lock screen designs doesn’t move the needle, but that doesn’t mean that tech stocks ($COMPQ) will go down and shareholders will lose money.
Quite the opposite for the tech cash cow business models.
She later goes on to complain that “The Fed seems to be responding to COVID-related supply shocks spanning 15 months the same way that Volcker battled inflation that had been brewing and building for 15 years. I would not be surprised to see a significant policy pivot in the next three to six months.”
First, Fed Central Bank governor Jerome Powell is nowhere close to the Volker era which saw short-term U.S. interest rates raised to 20% in 1981.
Powell is the antithesis of former Fed chair Paul Volcker and that’s why these bear market rallies are strong and lasting.
Powell wants a “soft landing” – that’s his goal.
The Fed has continuously said they aren’t ready to pivot and by pivot, I mean going from raising rates to lowering rates.
Wood believes that raising rates does nothing to help supply side shocks and that the Fed should start to condition itself to soon lower rates.
The Fed deals solely participates in demand-side policies.
The Fed is on record saying they plan to raise Fed Funds rates to 4% by the end of 2023 and keep rates there for an extended period.
That timeline seems to clash with Wood’s idea of dropping rates in 3 months.
The reason Wood has little credibility is because she has been saying the economy is experiencing deflation every 2 weeks for the past 3 years.
She has the most to lose because her portfolio possesses speculative tech stocks that mostly execute unprofitable business models and need low rates to refinance their large debts just to survive.
She continued to say that the Fed should be looking at metrics like “gold and copper” which “are flagging the risk of deflation.”
It’s quite bizarre that gold would be selected as the leading indicator for monetary policy.
Last time I checked, people can’t eat or drink gold and gold doesn’t heat your shower or apartment, even if you can install golden toilets like Russian President Vladimir Putin. Consumers can’t drive gold either. Higher or lower gold prices don’t indicate that our discretionary budgets are crashing or bulging either.
She also says to completely ignore employment because it’s a “lagging indicator.” This last sentence is false as well as it seems she is confusing this with the unemployment rate being a lagging indicator.
Unfortunately for Wood, the Fed slowly raising rates means it will be longer until they lower them because rates are still highly accommodative.
The silver lining for Wood is that the Fed is more worried about breaking the stock market which could evaporate trillions of dollars in stock market wealth.
Bear market rallies are essential for a soft landing, and we are seeing them in full force.
The last thing investors need is a crashing stock market and impotent tech companies. Remember that Silicon Valley and the tech industry are still the drivers of the US economy.
The Fed will do what they need to do to engineer the result of a soft landing regardless of Cathie Wood.
