Sorry for the obscure reference but if you’ve been investing for more than 20 years, you’ll remember Mary Meeker’s name. Ms. Meeker was in Cathie Wood’s shoes two decades ago and it would appear that they’re headed toward a similar fate. From Wall Street darling to relative obscurity faster than you can say Jackie Robinson.

Don’t confuse the “Tech Bubble of 2000” with the tech selloff taking place now. These are two different markets. But the playbook is the same.

Cathie Wood’s flagship fund ARK Innovation is caught in a tailspin of tech selling this week and some analysts see the stocks behind her strategies dropping even further before bottoming.

 

A 9% drop in the ETF this week is largely due to a spike in interest rates

At its low of the day on Thursday, the innovation-focused exchanged-traded fund was down more than 48% from its February 2021 all-time intraday high. That is a drop worse than the one the fund saw in March of 2020 during the low of the pandemic market rout.

The selling this week, which had spurred a 9% drop in the ETF this week, is largely due to a spike in interest rates. Higher rates typically punish growth pockets of the market that rely on low rates to borrow for investing in innovation. And their future earnings look less attractive when rates are on the rise.

The 10-year Treasury yield rose as high as 1.75% on Thursday, as rates have spiked to start the year with the Federal Reserve signaling a faster-than-expected policy tightening this year. The Fed wants you out of risk assets.

She is getting her highest-conviction stocks at lower prices

The depreciation in Wood’s stocks from mid-February of 2021 has not changed Ark’s forecast, however. Wood said she is just getting her highest-conviction stocks at lower prices. This should result in a quadrupling over the next five years, she has said. Wood has continued to buy the dip in her favorite stocks this week. Like I said… the same playbook.

I have nothing against Cathie Wood. I have a problem with the system. Financial advisors generally are compensated with a percentage of Assets Under Management (AUM). Wrap fees became popular as a way to share the risk with investors. The pitch is, “If I do a good job, I get a raise. If I lose your money, I take a pay cut.” Endearing.

Here’s the rub. Cash doesn’t count. Advisors don’t get paid on uninvested assets. That’s why Cathie Wood is buying the dips, the dunks, and the drowned in a technology market that is facing very serious headwinds instead of recommending temperance in the tech sector. Follow the money…find the truth.

Senior Life Settlements are an alternative asset class that offers highly non-correlated returns. The reason that’s good for investors is you know what’s going to happen with a life settlement. You buy this asset class at a stated discount to the face amount. You know what your profit is going to be. In virtually every other asset class, you buy assets at prevailing market prices and hope for positive price action. Hope is not a financial plan.

Absolute return assets allocated intelligently in an otherwise volatile portfolio gives you assurance that you’re mitigating some of the risks with chasing returns produced by the flavor of the month asset manager. This market is rolling over into defensive assets. Almost half of ARK’s value has evaporated. Sentimentality and praying for the good old days to return can be expensive.

I’ve picked on Cathie and Mary to make a point. The best stock pickers in the world can’t beat the Fed. Maybe it’s time to start thinking about making some changes to the way you allocate your assets. As brilliant as these women are, they’re no match for a systemic, seismic shift away from the way things were.

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