This 1st Week of April 2022 Thoughts-ARKK and too much Money
Updated: Apr 12
What is the difference between an ETF and a mutual fund? Both mutual funds and ETFs hold portfolios of stocks and/or bonds and occasionally something more exotic, such as precious metals or commodities. They must adhere to the same regulations concerning what they can own, how much they can have in one or a few holdings, and if they can borrow. ETFs usually have lower costs and they trade on exchanges like shares of stock. Mutual funds are often actively managed and you buy or sell at the close of the day. The general rule used to be that mutual funds had higher costs due to research while ETFs were baskets of stocks or bonds that tracked an index so had lower costs. Today, the lines are blurred: look for a mix of mutual funds and ETFs in your portfolio.
This Week’s Fund Profile: Change Finance ESG ETF: Make a Change
Few managers have gotten more attention than now famed Cathie Woods, founder of the epic ETF family, ARK. Epic, because of the rise, and the fall, as the times we are in shape what the new normal is. I mean, how can $38 turn into $156 in 10 months, and then turn back into $67?
Is this just a phase; are there new rules for “investing” or does the world just have Covid fever? I’ve been following Cathy’s Innovation Fund (ARKK) her Autonomous Tech & Robotics Fund (ARKQ), and her Space Exploration & Innovation Fund (ARKX) to make sure I bring you the best, newest, ideas. ARK, took a hit this week when the SEC turned down an application for a bitcoin exchange-traded fund from Cathy’s Ark 21 Shares. The SEC said that the ETF did not meet its burden under the Exchange Act and the Commission’s Rules of Practice that the fund be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest.’ Morningstar further piled on when it reduced ARKK to negative, saying; “ARK Innovation ETF (ARKK) shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores.” Reaction on social media to the SEC's decision was mostly hostile as a group of investors now think if it has a ticker symbol and you can buy it on Robin Hood, then “go for it.” Over the last 2 years I’ve written about many trends: FAANG; the cadre of tech stocks that shot up in 2020; Crypto, electric vehicles and other mega trends…all to determine if what glitters is truly gold. My goal? To separate the wheat from the chaff. To bring you vetted investment ideas. Sometimes you just have to let the tide go out to see who is wearing a bathing suit.
From 1978 to 2020, CEO compensation grew by 1,322%, far outstripping S&P stock market growth (817%) and earnings growth (341% between 1978 and 2019). In contrast, compensation of the typical worker grew by just 18.0% from 1978 to 2020. Read more here: CEO Comp is too high!
😊Why does this matter to you? Want to reduce inflation? Cut salaries and companies can reduce what they charge us to buy their stuff. Yeesh…just think…if some of that money was spent on employee health care benefits, family paid leave, R & D and increasing worker pay, how our economy would have grown!
Ya Gotta Always Fact Check! Environmental, Social and Governance investing has been a source of huge growth for the asset management industry: last year sustainable funds reached $2.74 TRILLION, 53% more than in 2020. The growth and size and very future of ESG investing has put it at a critical juncture as green-washing - using sustainable investing as a marketing gimmick - has provoked global regulators to improve disclosure. Russia’s war in Ukraine exposed the failings of assets stamped “GREEN” on the label and Morningstar reckons 14% of ESG funds had exposure to Russian assets. These assets, which now have been marked down to zero in the wake of western sanctions, is prompting a broader rethink about what counts as ESG investing and whether it is really a win-win for investors. If the aim of ESG investing is to deprive companies that “misbehave” of capital and reallocate it to “good” ones, should investors continue pouring money into other autocratic regimes like China, where human rights abuses are rife? If funds disentangled themselves from China and companies with exposure to it, what kind of returns would investors be left with? 😊 Why does this matter to you? Famed investor Carl Icahn this week expanded his campaign on ESG issues a month after launching a proxy fight with McDonald’s over its treatment of pigs and is taking Kroger to task over the same issue, as well as wage inequality. Icahn’s recent campaigns have been driven primarily by his concern for animal welfare. The complex and conflicted aims of institutionalized ESG are, in contrast, provoking rational skepticism. Trust that I will always bring you what adds value…what lines up with your values and that I am usually be ahead of the curve.