What we’re reading (5/26)
“The Rise And Fall Of Wall Street’s Most Controversial Investor” (New York Magazine). “Morningstar, a fund-rating company that usually takes a dispassionate perspective, recently published an excoriating review of Wood’s performance, downgrading ARKK to “negative” from neutral. Though her fund had beaten all other U.S. stock funds in 2020, Wood was now looking more like a one-hit wonder. Wood’s returns, Morningstar wrote, had been “wretched,” making ARKK “one of the worst-performing” funds in the U.S. since 2020. Her ‘perilous approach’ and ‘haphazard’ disregard for risk — unlike other asset managers, ARK doesn’t employ any risk-management staff, Morningstar noted — was likely to ‘hurt’ investors, according to the analysis.”
“Every Bear Market Is Different” (Compound Advisors). “[W]hile not likely, a recession could be coming without stocks declining much more than they already have. Given the fear out there, it’s safe to say that most investors are probably not envisioning one of these more benign scenarios. They are more likely fearing something much worse, a repeat of the 50%+ recessionary bear markets of 2000-02 and 2007-09. While that’s certainly a possibility, so is a shallower decline accompanied with a recession, or no recession at all.”
“Wall Street’s Housing Grab Continues” (The Economist). “One group of buyers…remains unfazed: Wall Street. What began as an opportunistic bet on single-family housing during America’s subprime crash of 2007-10 has morphed into a mainstream asset class. Today all sorts of institutions—from private-equity firms to insurers and pension funds—are piling into the sector. They are unlikely to vacate it: being a rentier looks as appealing as ever.”
“SEC Sues Florida Firm That Raised $410 Million For IPO-Linked Fraud” (Reuters). “The SEC said StraightPath pitched its investment vehicles as a way for ordinary investors to own ‘highly coveted,’ hard-to-find pre-IPO shares in such companies as plant-based burger maker Impossible Foods and cryptocurrency exchange Kraken. But the SEC said the Jupiter, Florida-based firm often did not have the shares, made ‘Ponzi-like’ payments to some investors, and commingled investors’ assets with its own.”
“If There’s A Recession Coming, Not Even The Fed Could Stop It Now” (Barron’s). “t’s the latest version of the classic Trolley Problem. A train trolley is barreling down the tracks and people are stuck on the line up ahead. The Fed, in this example, is at the lever to change the course of the tracks, but that would put other people in danger. What should it do? The answer always depends on how you set up the dilemma. For the Fed, the important thing is that no matter what it does, innocent people are going to get hurt as the economy slows. If it stopped raising rates, or even started to cut, ever-faster inflation would crater consumer spending and upend company plans. That leads to a bad recession in and of itself.”
