What's Happening with Cathie Wood?
Cathie Wood is one of the new generation's investment messiahs in the world of venture capital.
She manages ARK Invest, a fund focused on investing in disruptive companies — those that challenge the status quo and offer bold, groundbreaking innovation.
She rose to prominence in 2021, when her investments in companies like Tesla and Zoom proved exceptionally successful.
She became a sought-after market prophet: her opinions were received with great esteem, and investment money flowed freely. Some even compared her to Warren Buffett.
-
Since the beginning of 2024, $2.2 billion has been withdrawn from ARK.
The withdrawals came in response to particularly painful losses throughout 2023, which once again made clear that more conservative, less adventurous investments — like the venerable S&P 500 index — still deliver far better long-term results.
-
The comparison between Cathie Wood and Warren Buffett is laughable, because they represent complete opposites.
If there is one thing that defines Warren Buffett, it is his ability to think with a cool head and invest on logic alone. Warren Buffett can explain precisely why a company he invests in should generate value that exceeds the investment.
Cathie Wood, by contrast, appears to believe in some kind of golden touch that will turn her investments into successes — something that turns out to be wishful thinking and nothing more.
She believes Bitcoin will reach an astronomical valuation, yet she cannot offer a single explanation that would survive the logic test of an introductory economics course. (The scarcity argument applies equally to gold, and yet its value has never reached one million dollars per ounce.)
She believes Tesla will continue to grow, despite the fact that the market it created — electric vehicles — has long since ceased to be its exclusive domain, and its market share will only continue to shrink. She believes in Tesla despite its price-to-earnings multiples that are completely detached from reality.
If there is one thing the business and investment world teaches us time and again, it is that patience and sound logic usually win — while dizzying hype is temporary and leads to ruin.
Is investing in ARK a smart move?
In my view, the answer is no.
Photo credit: Reuters, Hugo Amaral/SOPA Images