An Open Letter to Cathie Wood

The Fed isn't our friend... An open letter to Cathie Wood... The perfect example of one of the world's great problems today... The only way out is through... Ominous or full of opportunity?... Janet Yellen: No 'serious concern' in the markets today... Reserve your spot for my most important stock market warning ever... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The Fed isn't our friend... An open letter to Cathie Wood... The perfect example of one of the world's great problems today... The only way out is through... Ominous or full of opportunity?... Janet Yellen: No 'serious concern' in the markets today... [Reserve your spot for my most important stock market warning ever](... --------------------------------------------------------------- Finally, Cathie Wood and I (Dan Ferris) agree on something... The ARK Investment Management founder [wrote an "open letter" to the Federal Reserve]( on Monday. In it, she took a similar stance to what I've always said about the central bank... The Fed isn't our friend. Wood believes the Fed is screwing everything up right now because it uses backward-looking data to make its interest-rate decisions. From her open letter... The Fed seems focused on two variables that, in our view, are lagging indicators – downstream inflation and employment – both of which have been sending conflicting signals and should be calling into question the Fed's unanimous call for higher interest rates. Wood might not be wrong about flaws in the Fed's approach. And I'm sure that isn't the only problem with the Fed. But here's where she and I diverge (yet again) in our thoughts... To me, Wood's letter isn't really about the Fed at all. Rather, it's a thinly veiled attempt to blame her company's miserable performance over the past 20 months on someone else. That's classic "Bull Club" behavior. [As I said in the September 2 Digest](... The [Bull Club] is made up of folks who get you into [a mega-bubble]... and try hard to keep you there. They'll do anything to convince you to stay. And they'll do it even after their favorite asset has generated massive losses and clearly hasn't lived up to its exaggerated promise. The members of this group are hailed as geniuses on the way up. And they're deemed hucksters (or worse) on the way down. Wood is trying her hardest. She's doing whatever it takes to get the fleeing legions of followers to stick with her in this mega-bubble by blaming the Fed for all the losses in her exchange-traded funds ("ETFs"). That's a huckster move. So for today's Digest, I couldn't think of a better way to point out how big a mistake the letter is for Wood than writing her an open letter of my own. Let's get to it... --------------------------------------------------------------- Dear Ms. Catherine Wood, Your flagship ARK Innovation Fund (ARKK) is down about 78% from its February 12, 2021 closing price of $156.58 per share. It has lost roughly $21 billion in value over that period. Don't accuse me of "cherry picking" that return, either. Measuring the return from the top isn't cherry-picking because we all know most of the money comes in at or near the top. And it's not like you've just suffered bad luck recently... Simon Lack, the founder and managing partner of SL Advisors, reported in a blog post on January 9, 2022 that the average $1 invested in ARKK was already underwater at that time. And ARKK is down another 60% since then! If you've addressed the losses with a public apology for putting investors' money into some of the worst garbage ever to trade publicly, I can't find it anywhere. I keep Googling "Cathie Wood finally apologizes for buying garbage and lighting $21 billion on fire"... and nothing comes up. In fact, you've done quite the opposite... On January 21, less than two weeks after Lack's blog post, you told investors to increase their allocations to ARK Investment Management's ETFs and that your conviction has "increased dramatically." You really just told them to buy the dip. Again, ARKK has been more than cut in half since then. You should've been educating people about cycles and speculation and the danger of throwing good money after bad. But instead, you doubled down and told them to buy more. You also told them in that January 21 interview that you had never lost money over a three-year rolling period. And you said that you use a five-year outlook when making investments. Well, the thing is... with ARKK around $34 per share today, it's now trading at 2017 prices. That's a round trip in five years (your alleged investment horizon). You've sold the dream of getting rich on "disruptive innovation" for years. I've never once heard you warn folks that ARKK was trading way above any reasonable valuation. Heck, even Elon Musk did that once with Tesla's (TSLA) stock. You've never counseled caution or prudence. You've always stuck to your narrative – even when it became obvious to everyone else that ARKK was in a giant bubble. You had to know that it couldn't possibly end well for ARKK's shareholders – the clients whose fees go into your bank account every month. But you kept acting like everything was OK anyway. And now, after lighting $21 billion of investor funds on fire (not including the damage in your other ETFs), you've added insult to injury by publishing an "open letter" to the Federal Reserve... The letter says you're concerned "that the Fed is making a policy error that will cause deflation." Deflation is lower prices. That's good for folks who work for a living. Inflation is bad for them. You're stumping for asset-price support in public, without sarcasm. Shame on you. Then, in your letter, you argued that the Fed's primary indicators – inflation and employment – are lagging and, therefore, inadequate for use in policy decisions. You won't ever catch me defending the Fed. It ought to be abolished. But you're not saying that... You very obviously want the Fed to reverse course and cut interest rates – though you never came out and said that. You simply added a bit of snark at the end of your letter... Unanimous? Really? Of course, you're referring to the unanimous decision by the Federal Open Market Committee to raise rates by 75 basis points at its last meeting in September. And you're very clearly insinuating that it was a glaring, avoidable mistake. Snark begets more snark, though... Many folks on Twitter and elsewhere dished it back to you even better than you gave it to the Fed. For example, CMG Venture Group mocked your letter with a fake quote from you... "The only way our fund survives is if you cut interest rates to 0 and turn on the money printer again." And analyst and newsletter writer Genevieve Roch-Decter tweeted... Cathie Wood's open letter to the Fed clearly isn't working. She should try writing it again in all caps to really get the point across. I don't blame them. I can barely fathom your lack of self-awareness. As you were criticizing the Fed, I can't believe that a voice in your head never even once whispered, "Hey, Cathie... psst... Maybe you're the pot calling the Fed's kettle black here... Maybe you should take care of your own backyard." It's starting to look like you'll never admit that you and your analysts simply don't know what you're doing as you put billions of investor dollars into pure, rotting garbage. I mean, your flagship ETF is already down about 78%. Are you trying for 90% or worse? Yes, 90% is an "A" in school. But I'm pretty sure most investors don't seek 90% losses. Your open letter is a clear attempt to divert attention away from your poor performance and toward your new enemy – the Fed. It's straight out of The Wizard of Oz... Instead of saying, "Pay no attention to that man behind the curtain," you're saying, "Pay no attention to the horrendous losses and lack of sustainable business models in our portfolios." All good propagandists have a prominent enemy they can use for a scapegoat when their karma comes back. You've chosen the Fed as your target. I almost hate to do this to you in public, Ms. Wood. But the truth is... You are the perfect example of one of the world's great problems today – possibly even its greatest problem. I'm talking about the ubiquitous desire of folks to avoid responsibility, play the victim, and blame someone else for consequences they created themselves. You're spending too much time and energy trying to put the right words in front of everyone – and not enough time trying to learn and perform the best possible actions. I sincerely hope that doesn't tell us all we need to know about you, Ms. Wood. But with each passing day... each $1 billion lost... each excuse made and horrible bit of advice given... you're painting yourself into a corner marked "huckster." I can only guess how you square all this with your devout Christianity... What would Jesus think of your actions? Would it be so out of his character to come to your offices and behave as he did toward the money changers in the temple, flipping over tables and chasing them away? Maybe you think that's a step too far – a bit too personal. You're right. And that's the point... This whole saga isn't about the Fed, interest rates, recession, inflation, deflation, or any other institution or abstract economic concept. It's about you, Ms. Wood. It's about what your investors have endured and what you haven't done about it. I know you're an avid Bible reader. So let me try to put this in terms that are more likely to hit home... A day of reckoning is coming. And if you wish to be hidden on the day of the Lord's anger, seek righteousness and humility and repent before it's too late. Do it for yourself, your employees, and most of all, your long-suffering investors. I doubt you'll listen. But I have some advice for you... Stop blaming anyone but yourself for the results your investors have suffered. Don't point your finger at the Fed. Instead, look at the garbage your ETFs are holding. Be honest about the business prospects of every stock in every ETF. Slash and burn all the garbage out of your ETFs. And put the money into actual innovative companies that stand a chance of surviving without requiring 0% interest rates and rampant speculation so they can sell shares at exorbitant valuations. Such companies exist, I promise. [On October 7]( I told our Digest readers about some research by your competitors at GMO. The firm pointed out that rising interest rates punish the kind of stocks in ARKK much worse than profitable growth companies. As long as you believe it's worth your time to write open letters to the Fed instead of calling emergency meetings to drastically upgrade your analytical efforts and capital-allocation skills... you won't get anywhere that you, your employees, or your investors want to go. But if you can do those things, you stand a good chance of surviving – and perhaps even thriving. You'll need all your strength and skill (and more) to keep your business alive and not go down in history as someone who fleeced investors out of billions while collecting fees. As many folks have said before, "The only way out is through." Good luck, Dan Ferris Stansberry Research --------------------------------------------------------------- Maybe you think it's unfair for me to single out Wood – and even more unfair to get personal... After all, we've all had at least some bad performance over the past year. The benchmark S&P 500 Index is down about 25% from its early January peak. And the tech-heavy Nasdaq Composite Index has plunged roughly 36% since last November. My own Extreme Value service hasn't been spared, either. (However, our decision so far this year to make just four new "long" recommendations and put on two "long/short" pairs trades to profit as stocks fall has certainly helped us do better than most folks.) But the difference between me and Wood is significant... I've spent much of the past five years warning people about the effects of rampant speculation and how painful it could be when the mega-bubble bursts. I've made a lot of those warnings right here in my Friday Digests. I've repeatedly recommended holding plenty of cash, selling garbage stocks, and holding gold (which has outperformed every major asset class but cash this year). Also, unlike Wood, I frequently acknowledge that I don't know the future and can be wrong. That's why I always say, "[Prepare, don't predict]( Well, I can't predict that my pessimism and semi-righteous indignation about Wood's relentless bullishness in the face of massive losses isn't a contrarian indicator... Lest I appear to suffer from Wood's lack of self-awareness... Let me point out that ARKK's price chart appears either ominous or full of opportunity. Take a look... I know some folks will look at that chart and think the stock appears to have hit at a major bottom. And others will look at the chart and believe it's about to fall off a cliff into oblivion. Which camp are you in? I think you already know where I'm planting my flag... If it's a major bottom, I'll look wrong and maybe even downright stupid. If it falls off a cliff, I suppose I'll look right. But I still won't feel so good... Nobody wants to watch anybody blow themselves and everyone around them to kingdom come. But at the point, at least I would've helped you avoid buying another deceptive dip and avoid getting blindsided. As long as Wood denies that she allocated money to a bunch of lousy, profitless businesses with poor prospects for survival – let alone any long-term business success – you should avoid ARKK. And you should probably do the same with all of the company's ETFs. But a bigger problem exists than just Wood's lack of introspection... Like we said last Friday, everybody wants to opine on monetary policy – including the United Nations. It's telling that Wood's public attempt to deflect attention away from her ETFs' eroding value found her contributing her voice to that particular cacophony. I'm not quite sure what that tells us. But in [my usual "via negativa" fashion]( I'm more confident of what it does not show you... Wood's preoccupation with the Fed doesn't show you how truly unimportant it is in determining the investment merit of any business. But it might just show us all the degree to which the umpires have taken over the ballgame. It might even demonstrate that way too many people think the Fed is the most important institution in the world. And I promise you, it's not... If I had to pick the world's most important institution, I'd probably go with... Your family... or my family... or my neighbor's family... or everybody's family. Family is the most important institution in the world. And any policy that's bad for the family – yours, mine, or everyone's – is bad for humanity. I'm pretty sure the Fed governors bailing out their rich friends every decade or so and kicking the can down the road is really, really bad for families everywhere. It encourages the buildup of errors and ever-larger misallocations of capital. And it virtually guarantees that every crisis will be worse than the previous one. That's what you get when you base your society on an all-powerful central government... with an all-powerful central bank at the center of your financial system. I'm also pretty sure that putting us all in a position where the Fed's actions either cause inflation to get worse than it already is... or cause a recession that puts people out of work and sends everyone's 401(k) accounts down 50%... isn't good for families, either. Yet here we are... We're sitting helpless, watching the umpires decide the winners and losers and determine how badly your retirement will go, while they stand ready to save their friends at every "too big to fail" pile of leverage on Wall Street. In his September 21 press conference, Fed Chair Jerome Powell answered a reporter's question about the kind of pain households would feel. Here's what he said... Higher interest rates, slower growth, and a softening labor market are all painful for the public that we serve. But they're not as painful as failing to restore price stability... That's rich. We have to hurt you now, or we'll have to hurt you worse later. And when Powell mentions "failing to restore price stability," he's talking about maintaining the inflation that treats his and his rich friends' assets so well – and the working people like disposable pawns. The government that sits adjacent to the Fed is even worse... During an interview this week, President Joe Biden said that a "slight recession" may occur in 2023. How are we supposed to believe him when the White House keeps trying to change the definition of a recession to begin with? Meanwhile, U.S. Treasury Secretary Janet Yellen sounded even more clueless this week... Financial-news network CNBC spoke to Yellen at the International Monetary Fund and World Bank's annual meetings in Washington, D.C. on Tuesday. Presumably with a straight face, she said... We really haven't seen signs of financial instability in the United States and our financial markets. And... I don't think we've seen anything that rises to the level of a serious concern. Keep in mind... As we've discussed before, we just endured [the worst first half of the year for stocks]( in more than 50 years. And the U.S. 10-year Treasury note had [its worst six months since 1788]( according to research by Deutsche Bank. I don't know about you, but that seems to be a "serious concern" to me. As U.S. Treasury secretary, Yellen is essentially in charge of 10-year Treasurys. Their interest rate is the most important price in the world. And yet, Yellen says everything is just fine today... after the worst six-month performance since Treasurys were invented. At this point, I could criticize other asset managers and folks running large government or quasi-government institutions. But by now, I hope you get the idea... These folks not only don't have your back... they're actively working against you. They're caught in the all-encompassing thrall of incentives to screw over the little folks like you. You're on your own. Well, not you – since you're a Stansberry Research subscriber... At Stansberry Research, we have many tools to help you preserve and grow your wealth. I've come up with one or two myself, including a "done for you" portfolio to combat inflation at the start of 2022... before the Consumer Price Index continued to surge throughout the year. So while regular Digest readers know I'm not in the predictions business... I do spend a lot of time thinking about likely future outcomes. That's what I mean by "prepare" for the future. Just a few days from now, I plan to help as many folks as possible do just that... On Wednesday, October 19, at 8 p.m. Eastern time, I'll deliver the most important stock market warning you've ever heard from us at Stansberry Research. What's coming will likely be worse than anything you've ever experienced – the dot-com crash, the 2008 crisis, and even the COVID-19 crash in early 2020. And ultimately, I believe it could ruin the retirements of millions of people over the next two decades. In short, it's bad news for 99% of investors... But you can be in the 1%. The bottom line is that the stakes have never been higher than right now. You need to immediately get out of the "wrong" investments – like ARKK – and into the "right" ones. That's why I'll also give away the names and ticker symbols of two well-known stocks you need to sell immediately. They're two of the most widely held stocks in the market... So there's a really good chance you own at least one of them. My urgent briefing is FREE for all Digest readers. We only ask that you save your spot in advance. [Click here for the full details](. --------------------------------------------------------------- Recommended Links: [October 19: Bad News for 99% of Investors]( The man who predicted the Lehman Brothers bankruptcy and "bitcoin crash" is issuing his newest warning. He says the biggest mega-bubble in stock market history is about to burst... and you need to prepare now. [Click here for full details](. --------------------------------------------------------------- [400%-Plus Potential Gains From the Most Valuable Discovery in Science Today?]( After two trips to Europe and meeting with the world's leading scientists in one groundbreaking new field... one man has figured out what's set to be released to an audience of 5,000 specialists, executives, journalists, and financial experts just days from now. This could be the ONLY triple-figure stock move left in 2022. [Read the exclusive briefing here](. --------------------------------------------------------------- New 52-week highs (as of 10/13/22): Black Stone Minerals (BSM), Cheniere Energy (LNG), and Texas Pacific Land (TPL). In today's mailbag, feedback on Medicare Advantage ("MA") health insurance plans, which our colleague Thomas Carroll wrote about [in yesterday's Digest](. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I was amazed that ONLY 48% of Seniors have Medicare Advantage Plans. Having recently had an unplanned but serious fall, I can assure readers that a MA Plan can literally save you tens of thousands of dollars (probably more). "I would add one note to an excellent article. Some MA Plans are Regional. Some provide wider Geographic Coverage. This can be important to those who travel or who have (extended stay) Vacation or Second Homes. Also some plans require referrals others do not. Make sure that you consider these options. "However, reread the article if you haven't seriously considered MA plans and are eligible. They are vastly improved." – Paid-up subscriber Bill B. "As a physician and Medicare recipient, I take a real exception to your article on MAs. They may be 'acceptable' but are certainly not the insurance panacea you make them out to be. "They are adequate if you live, and STAY in one geographical area; or if your [doctor] and health institution is part of their panel. However, if you move about a lot, or if your providers are not on their panel, or if you choose to 'go out of network' to seek the best care possible for an ailment, then you are severely disadvantaged. "At the very least, your article should have at least mentioned those issues, in the interest of clarity, honesty, and transparency." – Paid-up subscriber M.R. Corey McLaughlin comment: We received these and several more notes on the topic of MA plans. Thanks to everyone who wrote in. Thomas will share a full reply next week. But for now, I want to reiterate a point he made yesterday... It's true that MA isn't for everyone. We encourage anyone who might be interested in the plans to make sure it's right for your specific situation. But regardless, MA is becoming more widely used among the Medicare-age population (48% of eligible people). And that likely surprises many folks. That's a big reason why Thomas and our Prosperity Investor team covered the story in their latest issue. And as part of their analysis, they recommended one of the largest providers and innovators of MA insurance in the U.S. (If you're a subscriber or Stansberry Alliance partner, you can read the full write-up [right here]( Good investing, Dan Ferris Eagle Point, Oregon October 14, 2022 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 836.3% Retirement Millionaire Doc ADP Automatic Data 10/09/08 814.5% Extreme Value Ferris MSFT Microsoft 02/10/12 717.0% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 542.6% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 472.5% Stansberry Innovations Report Wade AFG American Financial 10/12/12 417.0% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 402.6% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 389.0% Retirement Millionaire Doc TPL Texas Pacific Land 11/05/20 325.8% Stansberry's Investment Advisory Porter NTLA Intellia Therapeutics 12/19/19 280.3% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter 2 Retirement Millionaire Doc 2 Stansberry Innovations Report Engel/Wade 1 Extreme Value Ferris --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ONE-USD Harmony 12/16/19 1,140.4% Crypto Capital Wade ETH/USD Ethereum 12/07/18 1,132.3% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,083.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 829.7% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 415.9% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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