Thread by @ShitMgmtSays

I want to help people understand Cathie Wood’s marketing brilliance. She’s not nuts. I joke that she’s guided by Jesus (which she is), but it’s really doing her strategy a great disservice. When I refer to her work, I mean marketing, as a fund manager fighting for AUM.

Thread.

Let’s start with a few quotes.

From Odd Lots, @TheStalwart and @tracyalloway’s excellent podcast, an interview with ARKK’s Head of Research Brett Winton (notably in February 2021, when ARKK was at peak AUM): "If you're wrong, that's fine, as long as you are uniquely wrong..."

...If you're uniquely wrong, everybody thought you were crazy anyway, & so it's not priced in. If your forecasts were on avg worse--but unique--that is better than having forecasts that are actually closer to the actual truth but the same as everybody else."

Let that sink in.

Later in the same episode, Winton again:

"Could we look really dumb 12 months from now? Yes. In fact, I think it's likely that at some point, people will think ARKK was a scam, and we don't know our left from our right, and we're doing things wrong."

bloomberg.com/news/audio/202…

H/t to @ttp_cap I heard this episode recently, my eyes exploded out of my head, and I immediately googled for a transcript. This account had these lines perfectly transcribed.

@ttp_cap also highlighted another gem from Wood’s appearance on @patrick_oshag's Invest Like the Best:

"We are quite happy to have blog aggregators like Seeking Alpha take our research, slap it on their site if they think it's going to drive traffic..."

"...And why are we happy? We don't have to do anything. We can just watch the bulls and bears insult one another over our assumptions."

.@ranjanxroy breaks this approach down well on his great blog on Cathie Wood and Content Strategy (March 2021)

readmargins.com/p/cathie-wood-…

“That simple push of numerical information catalyzes an army of investors, all looking for guidance, affirmation, and just something to think about, to think about your stocks. Every day you manage to live, as the saying goes, rent-free in all of our heads."

"It's become pretty clear in the past decade there's a correlation between power and the space you occupy in our collective consciousness. This is even more applicable in financial markets (than, say, politics) as this kind of feedback loop can result more directly in ..."

"... in a desirable outcome. Cathie Wood’s sole job is to get others to buy the stocks she owns, and with one email push, it’s magically done.”

Roy is discussing the daily emails that go out, detailing ARKK trades and holdings, but it's all part of the same publicity push.

Earlier in the week, I’d highlighted how the media failed the crypto movement. And they’re complicit with the hypergrowth of tech/ARKK reporting as well.

https://twitter.com/ShitMgmtSays/status/1536761905619972096?s=20&t=FaxVj-Z2R6CBkbrE3WHp8A

Roy highlighted a concrete example, when CNN published this:

cnn.com/2021/03/22/inv…

Roy: “Publishing a report saying Tesla could go to $3,000 is not a case of an ‘analyst predicting’ something--it's an organization with a vested financial interest pushing a specific message."

"Nowhere does the CNN piece mention TSLA is the biggest holding in the ARK Innovation ETF. It takes a conventional journalistic effort at presenting 'both sides' of Tesla's valuation (insurance might or might not work! Robotaxis might or might not work!), yet leaves out..."

"...that integral detail that a major Tesla shareholder is pushing a very aggressive valuation call at a time when there's a lot of stimulus money looking for a home & TSLA has hit a bit of a rough patch.

And that headline is coming out on CNN, meaning it will trickle down..."

"...to any number of other publications. We’re left with this simmering narrative that there is this $3000 price target is just ‘out there.’”

So, are you getting it yet?

Winton/Wood publish outlandish stuff solely to drive interest, debate, ridicule because it’s totally free marketing. They need people to constantly be talking about the names they own to move pricing in the names they own

Winton says--and I cannot emphasize this enough -- that it’s better to be super wrong than to be right & in line with consensus. The important thing is to be driving clicks, interest, and living rent-free in our heads

Maybe it works out, maybe it doesn’t. Because it doesn’t matter!

In an era where narrative triumphed over fundamentals for so long, those clicks drove purchases and clicks drove ARKK AUM. The latter of which is still remarkably resilient.

So that era and phenomenon are clearly still ongoing.

Some pricing has corrected, but mentally, emotionally, it takes a lot longer to let go of narrative.

And I’m not at all sure it’ll ever go away. We live in an era of narrative over fundamentals, influencing over facts

We all made fun of Sean Spicer years ago for coining “alternative facts." But joke's on us. He was totally right.