Your job in 2022: take back control!

Friday, 24 December 2021 — Albert Park

[6 min read]

Dear Reader,

Hardly anyone would say the year 2021 was ordinary and humdrum. I daresay many would be unable to mention a year as strange and perplexing.

Apart from living through months of confinement at home and only venturing out for exercise or buying groceries, many would also have realised the markets make little sense.

The ASX All Ordinaries Index [ASX:XAO] is up almost 12% as at the close of Wednesday.

The Dow Jones Index [NYSE:DJIA] is up almost 16%.

These are broad market indices.

The performance of certain assets is even more jaw-dropping.

Take Ethereum [ETH], for example, it’s up 453%.

I’m sure there are cryptos and non-fungible tokens (NFT) that are telling Ethereum to ‘hold my beer’.

I suspect that gold enthusiasts may feel a little sour about how their investments performed this year. It has been underwhelming, to say the least.

Gold in US dollar terms fell by just under 6%, but is up by almost 2% in Australian dollar terms.

Gold mining stocks copped a smacking this year. The ASX Gold Index [ASX:XGD] fell 13.7%. Still, it fared better than their US counterparts.

But I’m not here to moan about it. There’s a blessing in disguise when a market is out of favour.

What I want to focus on today are several interesting trends happening in the markets over the year.

Main Street finds a way to beat Wall Street and hedge fund managers

From the perspective of the financial markets, 2021 saw some interesting developments.

The ordinary Joe and Jane on Main Street actually beat Wall Street and hedge fund managers at their own game.

Yes, winning against professionals who earn millions each year investing on behalf of others.

We saw how Melvin Capital and Citadel Group almost came undone as a result of the ‘short squeezes’ on AMC Entertainment Holdings Inc [NYSE:AMC] and GameStop Corp [NYSE:GME].

Basically, a motley group of investors from a Reddit subgroup, ‘WallStreetBets’, launched targeted buying sprees on selected companies that Wall Street firms and hedge funds had a volume of short positions on, to squeeze out these positions.

This would force these institutions to reverse their positions and buy back the shares, only to do so at much higher prices so they incur a hefty loss.

It worked so well that the ‘Establishment’, comprising the financial regulators and hedge funds, worked with the online share-trading app provider, Robinhood, to save their skins by changing the rules to stop these buying sprees.

You know that the ‘Establishment’ is on the losing end when it has to move the goalposts to fix an unfavourable situation.

It may have been years in the making. We are seeing the façade of ‘the smartest guys in the room’ fade from Wall Street, hedge funds, and financial regulators.

How about media darling Cathie Wood, the Chief Investment Officer and Portfolio Manager of ARK Investment Management? She frequented the mainstream financial programs, where she discussed her investment strategies, especially the ARK Innovation fund that focuses on the technology sector.

Well, her fund has plunged over the last month and is down over 20% this year. Actually, eight out of nine funds run by ARK are down for the year.

To her credit though, seven funds are still up from five years ago. Some of them are up by triple digits in percentage terms.

My point is, the shine is coming off of these market gurus.

The hidden agenda of managed funds

There’s something else aside from the shine that’s coming off of these market gurus — their veil of secrecy and ulterior motives.

You’re probably becoming aware over the year that some of these investment funds are vehicles of political and social activism. Look no further than the likes of George Soros, Warren Buffett, David Rubenstein, and Chuck Feeney. These people don’t just move markets, but societies.

The reason why the typical Joe or Jane go to the polls and up being disappointed is that the lobbyists have taken all the seats at the table. It’s a cruel twist of fate when Joe and Jane unwittingly funded them to do so via their superannuation and managed fund investments.

We saw it this year as many corporations either initiated, played along with, or went beyond government authority to impose mandates and tred on the liberty of the people.

2022 could be the year where the world will see how these investment vehicles have a more ignoble agenda about them.

In short, you should know that you are handing over your voice to the trustees when they invest your hard-earned savings. These people vote on your behalf on company boards, the government, and the broader community. They never write to you and ask for what you stand for, nor do they care.

They just assume you are satisfied with a solid return or a stable income stream.

The reward of taking back control

This year, many people are starting to realise that they can take matters into their own hands and earn a solid return for themselves.

Social media has made it that much easier.

The key is to follow the right groups, set up a share broking account and/or crypto wallet, and away you go. Others subscribe to investment advisory services, which is what you have done.

In fact, most of you are years ahead of the crowd. You wanted to be ‘hands-on’, and we’re more than happy to work with you by offering our recommendations, complete with trading instructions.

It’s like a cooking kit that comes with the recipe. You do the work and enjoy the fruits of your labours.

Furthermore, you are not just taking back control of your money, but also the destiny of society.

As I sign off for 2021, I wish you and your loved ones a blessed Christmas. See you in 2022.

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

Cathie Wood, the queen of the tech underworld, was back in the news yesterday, giving more evidence that she has lost her mind. From Bloomberg:

‘Cathie Wood, founder and CEO of Ark Investment Management, said that innovation stocks are in “deep value territory” as Friday trading saw continued declines, with the S&P 500 falling 1%.

‘“After correcting for nearly 11 months, innovation stocks seem to have entered deep value territory,” she wrote in a blog post she said was intended to share ARK’s thought process. “We take advantage of volatility during corrections and concentrate our portfolios toward our highest conviction stocks.”’

But where is the real ‘deep value?’. In tech companies with no earnings and, most likely, no future? Or in things that have nothing to do with tech at all?

This week, a hush settles over Christendom.

Despite the invention of the steam-powered loom, internal combustion engines, double-entry bookkeeping, hip hop music, and the metaverse, real life goes on. Real people worship…suffer…make fools of themselves…and die. Real bells ring out one year and in another. Real friends grasp hands…take off their masks, and embrace.

We get fewer emails. Business slows. People turn their thoughts to other things. Visions of sugarplums…or 1,000% crypto gains…dance in their heads.

We’re dreaming of a white Christmas, too. Of course, we might find a snow-covered country in the metaverse; but the more the make-believe world races ahead, the more we yearn for the steady plod of the real one.

Rough seas ahead

Yesterday, after more tests, we came to France. We had hoped to take the ferry, but the ferries between France and Ireland are all booked up.

‘Brexit’ was the one-word explanation at Irish Ferries.

But this is not a good time to make the sea crossing, anyway. The waves can be rough. So we took a plane from Dublin to Paris…and then a car down to our house.

A son was already there, he had prepared a jolly, warm fire in the kitchen. Another son and his family arrive tomorrow. Other parts of the family come soon after.

This morning…it was freezing cold…and white…as the treetops glistened with frost. Later in the day, temperatures rose and we enjoyed the soft, melancholy stillness of midwinter.

And now we are back at work at our outpost in la France profonde.

‘Have you seen the wolf,’ we asked a neighbour.

‘Yes, everybody’s seen him now. And this is the season that the young males leave their families and go off on their own. So, there are more and more sightings…

‘…and they say that a pack of them is settling in in the area. We’re just going to have to learn to live with them again, just as we used to.

‘The wolves are coming…and the people are going. That’s what’s happening around here. The young go to the cities…and the old die.’

The small towns and countryside, in France, Spain, and Italy, are emptying. Birth rates have tumbled. Houses are vacant. Immigration keeps populations from falling, but the immigrants go to cities. And the young go to the metaverse.

‘Our whole way of life is departing,’ he continued. ‘Young people spend all their time on their Facebook or iPhone connections. They don’t know how to make a fire, let alone sausages.’

God’s work

Change is constant. And not always what you hope for. New technology solves some problems, and creates others. Split the atom and you get nuclear power…and Nagasaki. Develop the internet and you get Zoom meetings…and Facebook.

This year, some people may even celebrate the holidays in the metaverse. They will take leave of their families, retreat to dens and basements, and enter into the ersatz life waiting for them there.

Cathie Wood believes that tech ‘innovations’ are ‘God’s work’. That is where our deliverance will come from, she believes. Or, at a minimum, choose the right ones and you will get rich.

As for Bitcoin [BTC] — probably the most ‘disruptive’ and ‘innovative’ of any new tech of the 21st century — she says it will go to $560,000, giving investors an almost 1,000% upside.

She further says, after much ‘soul searching’, that her ETF should return 40% per year for the next five years, a total return of 437% by 2026.

But perhaps Ms Wood should have searched elsewhere. Are the stocks in her ETF really ‘deep values’ at today’s prices? We checked the P/E ratio. Alas, ‘N/A’ it says. Because, while the companies have plenty of price, P, they have no earnings, E, to compare them too. Value usually refers to how much you get for your money, in ARK you don’t get much.

And what kind of hocus-pocus is behind her $560,000 price for bitcoin? The world has never seen such a thing; what possible reference could she have? None, most likely.

Ditto, the 40% per year. Not impossible…but what are the odds that Ms Wood has latched onto the few new techs that will not only survive five years of newer techs…but also grow into profitable, real companies?

How likely is it that they bring a salvation equal to the virgin birth…or at least a passing enjoyment to rival a well-made eggnog?

Regards,

Bill Bonner,
For The Daily Reckoning Australia